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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, geopolitical disruptions, central banks are concerned over increasing inflation, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, 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 -

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.

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.

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.

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.

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.

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.

Innovation driven organization

– China Merchants Securities is one of the most innovative firm in Investment Services sector.

Effective Research and Development (R&D)

– China Merchants Securities has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Merchants Securities staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of China Merchants Securities, it seems that company is thinking out the frontier risks that can impact Investment Services 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.

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.

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.

Employees’ less understanding of China Merchants Securities strategy

– From the outside it seems that the employees of China Merchants Securities 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.

Compensation and incentives

– The revenue per employee of China Merchants Securities is just above the Investment Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

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.

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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 -

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.

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.

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.

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.

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.

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.

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 Merchants Securities to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Better consumer reach

– The expansion of the 5G network will help 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.

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.

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.

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.

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 -

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.

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.

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.

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents China Merchants Securities with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.

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.

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.

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.

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.

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.

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.

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.

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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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