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 – talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing energy prices, supply chains are disrupted by pandemic , geopolitical disruptions, technology disruption, increasing transportation and logistics costs, etc

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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.

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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

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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 -

High switching costs

– The high switching costs that China Merchants Securities 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.

Successful track record of launching new products

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

Low bargaining power of suppliers

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

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.

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.

Highly skilled collaborators

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

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.

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.

Cross disciplinary teams

– Horizontal connected teams at the China Merchants Securities are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Superior customer experience

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

Sustainable margins compare to other players in Investment Services industry

– China Merchants Securities has clearly differentiated products in the market place. This has enabled China Merchants Securities to fetch slight price premium compare to the competitors in the Investment Services industry. The sustainable margins have also helped China Merchants Securities to invest into research and development (R&D) and innovation.

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.

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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 -

Workers concerns about automation

– As automation is fast increasing in the Investment Services industry, China Merchants Securities 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.

Aligning sales with marketing

– From the outside it seems that China Merchants Securities needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at China Merchants Securities can leverage the sales team experience to cultivate customer relationships as China Merchants Securities is planning to shift buying processes online.

Products dominated business model

– Even though China Merchants Securities has some of the most successful models in the Investment Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Merchants Securities should strive to include more intangible value offerings along with its core products and services.

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.

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.

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

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.

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.

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.

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.

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.

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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.

Loyalty marketing

– China Merchants Securities 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.

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.

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.

Creating value in data economy

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

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. China Merchants Securities can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Manufacturing automation

– China Merchants Securities can use the latest technology developments to improve its manufacturing and designing process in Investment 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.

Use of Bitcoin and other crypto currencies for transactions in Investment Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for China Merchants Securities in the Investment Services industry. Now China Merchants Securities can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, China Merchants Securities can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help China Merchants Securities to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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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 -

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.

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.

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 Merchants Securities needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.

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.

Technology acceleration in Forth Industrial Revolution

– China Merchants Securities has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, China Merchants Securities needs to keep up with the evolution of technology in the Investment Services 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.

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.

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.

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.

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.

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.

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

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 Merchants Securities 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.

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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.

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