Baoshan Iron & Steel (600019) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Baoshan Iron & Steel (China)
Based on various researches at Oak Spring University , Baoshan Iron & Steel is operating in a macro-environment that has been destablized by – 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, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings,
technology disruption, wage bills are increasing, etc
Introduction to SWOT Analysis of Baoshan Iron & Steel
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Baoshan Iron & Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Baoshan Iron & Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Baoshan Iron & Steel 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 Baoshan Iron & Steel can be done for the following purposes –
1. Strategic planning of Baoshan Iron & Steel
2. Improving business portfolio management of Baoshan Iron & Steel
3. Assessing feasibility of the new initiative in China
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Baoshan Iron & Steel
Strengths of Baoshan Iron & Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Baoshan Iron & Steel are -
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Baoshan Iron & Steel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Baoshan Iron & Steel 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.
Innovation driven organization
– Baoshan Iron & Steel is one of the most innovative firm in Iron & Steel sector.
Highly skilled collaborators
– Baoshan Iron & Steel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Baoshan Iron & Steel have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Iron & Steel
– Baoshan Iron & Steel is one of the leading players in the Iron & Steel industry in China. Over the years it has not only transformed the business landscape in the Iron & Steel industry in China but also across the existing markets. The ability to lead change has enabled Baoshan Iron & Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Iron & Steel industry
– Baoshan Iron & Steel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Baoshan Iron & Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Baoshan Iron & Steel 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.
Effective Research and Development (R&D)
– Baoshan Iron & Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Baoshan Iron & Steel staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Baoshan Iron & Steel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Baoshan Iron & Steel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Baoshan Iron & Steel is one of the leading players in the Iron & Steel industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Baoshan Iron & Steel 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.
Low bargaining power of suppliers
– Suppliers of Baoshan Iron & Steel in the Basic Materials sector have low bargaining power. Baoshan Iron & Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Baoshan Iron & Steel to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Baoshan Iron & Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baoshan Iron & Steel are -
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in China, Baoshan Iron & Steel 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 Iron & Steel industry.
Products dominated business model
– Even though Baoshan Iron & Steel has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Baoshan Iron & Steel 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 Baoshan Iron & Steel supply chain. Even after few cautionary changes, Baoshan Iron & Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Baoshan Iron & Steel vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Baoshan Iron & Steel products
– To increase the profitability and margins on the products, Baoshan Iron & Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Baoshan Iron & Steel has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Baoshan Iron & Steel 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.
Workers concerns about automation
– As automation is fast increasing in the Iron & Steel industry, Baoshan Iron & Steel 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.
Interest costs
– Compare to the competition, Baoshan Iron & Steel 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.
High cash cycle compare to competitors
Baoshan Iron & Steel has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Baoshan Iron & Steel, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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 operating costs
– Compare to the competitors, Baoshan Iron & Steel has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Baoshan Iron & Steel lucrative customers.
Employees’ less understanding of Baoshan Iron & Steel strategy
– From the outside it seems that the employees of Baoshan Iron & Steel don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Baoshan Iron & Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Baoshan Iron & Steel are -
Using analytics as competitive advantage
– Baoshan Iron & Steel has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled Baoshan Iron & Steel to build a competitive advantage using analytics. The analytics driven competitive advantage can help Baoshan Iron & Steel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Baoshan Iron & Steel 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 Iron & Steel industry.
Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Baoshan Iron & Steel in the Iron & Steel industry. Now Baoshan Iron & Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Baoshan Iron & Steel has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Baoshan Iron & Steel to build a more holistic ecosystem for Baoshan Iron & Steel products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Baoshan Iron & Steel is facing challenges because of the dominance of functional experts in the organization. Baoshan Iron & Steel can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Baoshan Iron & Steel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Baoshan Iron & Steel can improve the customer journey of consumers in the Iron & Steel 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Baoshan Iron & Steel 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.
Better consumer reach
– The expansion of the 5G network will help Baoshan Iron & Steel to increase its market reach. Baoshan Iron & Steel 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.
Loyalty marketing
– Baoshan Iron & Steel 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.
Leveraging digital technologies
– Baoshan Iron & Steel 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Baoshan Iron & Steel can use these opportunities to build new business models that can help the communities that Baoshan Iron & Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Learning at scale
– Online learning technologies has now opened space for Baoshan Iron & Steel 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.
Threats Baoshan Iron & Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Baoshan Iron & Steel are -
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.
Regulatory challenges
– Baoshan Iron & Steel 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 Iron & Steel industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Baoshan Iron & Steel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Baoshan Iron & Steel in Iron & Steel industry. The Iron & Steel 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.
High dependence on third party suppliers
– Baoshan Iron & Steel 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.
Consumer confidence and its impact on Baoshan Iron & Steel 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 Iron & Steel industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Baoshan Iron & Steel is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Baoshan Iron & Steel business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Baoshan Iron & Steel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
Technology acceleration in Forth Industrial Revolution
– Baoshan Iron & Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Baoshan Iron & Steel needs to keep up with the evolution of technology in the Iron & Steel 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.
Increasing wage structure of Baoshan Iron & Steel
– 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 Baoshan Iron & Steel.
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 Baoshan Iron & Steel.
Weighted SWOT Analysis of Baoshan Iron & Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Baoshan Iron & Steel 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 Baoshan Iron & Steel 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 Baoshan Iron & Steel 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 Baoshan Iron & Steel 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 Baoshan Iron & Steel needs to make to build a sustainable competitive advantage.
