China Merchants Securities (600999) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Merchants Securities (China)

Based on various researches at Oak Spring University , China Merchants Securities is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc

---

---

---

---

Introduction to SWOT Analysis of China Merchants Securities

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

---

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

The strengths of China Merchants Securities are -

Superior customer experience

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

Ability to lead change in Investment Services

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

Training and development

– China Merchants Securities has one of the best training and development program in Financial 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.

Strong track record of project management in the Investment Services industry

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

Operational resilience

– The operational resilience strategy of China Merchants Securities comprises – understanding the underlying the factors in the Investment 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 Merchants Securities 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 Investment 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.

Ability to recruit top talent

– China Merchants Securities is one of the leading players in the Investment 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.

Learning organization

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

Organizational Resilience of China Merchants Securities

– The covid-19 pandemic has put organizational resilience at the centre of everthing China Merchants Securities does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High brand equity

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

Diverse revenue streams

– China Merchants Securities is present in almost all the verticals within the Investment Services industry. This has provided China Merchants Securities 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.

Digital Transformation in Investment Services industry

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

---

---

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

The weaknesses of China Merchants Securities are -

Skills based hiring in Investment Services industry

– The stress on hiring functional specialists at China Merchants Securities 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.

Low market penetration in new markets

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

Need for greater diversity

– China Merchants Securities 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.

Lack of clear differentiation of China Merchants Securities products

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

Capital Spending Reduction

– Even during the low interest decade, China Merchants Securities 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 Investment Services industry using digital technology.

Ability to respond to the competition

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

High dependence on China Merchants Securities ‘s star products

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

High bargaining power of channel partners in Investment Services industry

– because of the regulatory requirements in China, China Merchants Securities 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 Investment Services industry.

High cash cycle compare to competitors

China Merchants Securities has a high cash cycle compare to other players in the Investment 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.

Slow to strategic competitive environment developments

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

Slow decision making process

– As mentioned earlier in the report, China Merchants Securities has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. China Merchants Securities 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.

---

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

The opportunities of China Merchants Securities are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, China Merchants Securities is facing challenges because of the dominance of functional experts in the organization. China Merchants Securities can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Low interest rates

– Even though inflation is raising its head in most developed economies, China Merchants Securities 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 Merchants Securities has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled China Merchants Securities to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Merchants Securities to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. China Merchants Securities 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 China Merchants Securities in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.

Leveraging digital technologies

– China Merchants Securities 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

– China Merchants Securities can develop new processes and procedures in Investment 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Merchants Securities to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for China Merchants Securities to hire the very best people irrespective of their geographical location.

Buying journey improvements

– China Merchants Securities can improve the customer journey of consumers in the Investment Services 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.

Building a culture of innovation

– managers at China Merchants Securities 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 Investment Services industry.

Learning at scale

– Online learning technologies has now opened space for China Merchants Securities 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.

Better consumer reach

– The expansion of the 5G network will help China Merchants Securities to increase its market reach. China Merchants Securities 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Merchants Securities 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 Merchants Securities 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.

---

Threats China Merchants Securities External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of China Merchants Securities are -

Easy access to finance

– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. China Merchants Securities can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 China Merchants Securities.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for China Merchants Securities in Investment Services industry. The Investment 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 Merchants Securities 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 Merchants Securities can take advantage of this fund but it will also bring new competitors in the Investment Services industry.

Stagnating economy with rate increase

– China Merchants Securities 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 Investment Services industry.

Learning curve for new practices

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

Shortening product life cycle

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

High dependence on third party suppliers

– China Merchants Securities 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, China Merchants Securities 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 China Merchants Securities prominent markets.

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 Merchants Securities in the Investment Services sector and impact the bottomline of the organization.

Consumer confidence and its impact on China Merchants Securities 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 Investment Services industry and other sectors.

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

– China Merchants Securities 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 Investment Services industry regulations.

---

Weighted SWOT Analysis of China Merchants Securities Template, Example

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

--- ---