China Railway Construction (601186) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Railway Construction (China)

Based on various researches at Oak Spring University , China Railway Construction is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , there is backlash against globalization, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of China Railway Construction

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

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

The strengths of China Railway Construction are -

Learning organization

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

Successful track record of launching new products

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

Training and development

– China Railway 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.

Ability to lead change in Construction Services

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

Highly skilled collaborators

– China Railway 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 China Railway Construction have helped the firm to develop new products and bring them quickly to the marketplace.

Operational resilience

– The operational resilience strategy of China Railway 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.

Analytics focus

– China Railway 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 China 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.

Strong track record of project management in the Construction Services industry

– China Railway Construction is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Effective Research and Development (R&D)

– China Railway Construction has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Railway 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.

Low bargaining power of suppliers

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

Ability to recruit top talent

– China Railway Construction is one of the leading players in the Construction Services 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.

Superior customer experience

– The customer experience strategy of China Railway Construction in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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

The weaknesses of China Railway Construction are -

Low market penetration in new markets

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

Slow to strategic competitive environment developments

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

Products dominated business model

– Even though China Railway 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. China Railway Construction should strive to include more intangible value offerings along with its core products and services.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at China Railway 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.

High operating costs

– Compare to the competitors, China Railway 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 China Railway Construction lucrative customers.

Interest costs

– Compare to the competition, China Railway 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.

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Railway Construction is slow explore the new channels of communication. These new channels of communication can help China Railway Construction to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

Capital Spending Reduction

– Even during the low interest decade, China Railway 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.

High dependence on China Railway Construction ‘s star products

– The top 2 products and services of China Railway 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 China Railway Construction has relatively successful track record of launching new products.

Lack of clear differentiation of China Railway Construction products

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

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

The opportunities of China Railway Construction are -

Learning at scale

– Online learning technologies has now opened space for China Railway 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for China Railway 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.

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 China Railway Construction in the Construction Services industry. Now China Railway Construction can target international markets with far fewer capital restrictions requirements than the existing system.

Building a culture of innovation

– managers at China Railway Construction 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 Construction Services industry.

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 China Railway 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, China Railway Construction is facing challenges because of the dominance of functional experts in the organization. China Railway 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.

Manufacturing automation

– China Railway 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.

Developing new processes and practices

– China Railway 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, China Railway 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.

Using analytics as competitive advantage

– China Railway 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 China Railway Construction to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Railway Construction to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Loyalty marketing

– China Railway 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. China Railway 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. China Railway 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.

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. China Railway Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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

The threats of China Railway Construction are -

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. China Railway 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.

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

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 China Railway Construction in the Construction Services sector and impact the bottomline of the organization.

Shortening product life cycle

– it is one of the major threat that China Railway Construction is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

Learning curve for new practices

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

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. China Railway Construction can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Stagnating economy with rate increase

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

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents China Railway 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for China Railway 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.

Environmental challenges

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

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.

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Weighted SWOT Analysis of China Railway Construction Template, Example

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

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