Wanhua Chemical (600309) SWOT Analysis / TOWS Matrix / MBA Resources
Chemicals - Plastics & Rubber
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Wanhua Chemical (China)
Based on various researches at Oak Spring University , Wanhua Chemical is operating in a macro-environment that has been destablized by – there is backlash against globalization, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing household debt because of falling income levels, increasing commodity prices,
cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Wanhua Chemical can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wanhua Chemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wanhua Chemical 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 Wanhua Chemical can be done for the following purposes –
1. Strategic planning of Wanhua Chemical
2. Improving business portfolio management of Wanhua Chemical
3. Assessing feasibility of the new initiative in China
4. Making a Chemicals - Plastics & Rubber sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wanhua Chemical
Strengths of Wanhua Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wanhua Chemical are -
Diverse revenue streams
– Wanhua Chemical is present in almost all the verticals within the Chemicals - Plastics & Rubber industry. This has provided Wanhua Chemical 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.
Ability to recruit top talent
– Wanhua Chemical is one of the leading players in the Chemicals - Plastics & Rubber 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.
Sustainable margins compare to other players in Chemicals - Plastics & Rubber industry
– Wanhua Chemical has clearly differentiated products in the market place. This has enabled Wanhua Chemical to fetch slight price premium compare to the competitors in the Chemicals - Plastics & Rubber industry. The sustainable margins have also helped Wanhua Chemical to invest into research and development (R&D) and innovation.
Learning organization
- Wanhua Chemical 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 Wanhua Chemical is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Wanhua Chemical emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Wanhua Chemical 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.
Training and development
– Wanhua Chemical has one of the best training and development program in Basic Materials 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.
Highly skilled collaborators
– Wanhua Chemical has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemicals - Plastics & Rubber industry. Secondly the value chain collaborators of Wanhua Chemical have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Chemicals - Plastics & Rubber
– Wanhua Chemical is one of the leading players in the Chemicals - Plastics & Rubber industry in China. Over the years it has not only transformed the business landscape in the Chemicals - Plastics & Rubber industry in China but also across the existing markets. The ability to lead change has enabled Wanhua Chemical in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Wanhua Chemical has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wanhua Chemical to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Wanhua Chemical is one of the most innovative firm in Chemicals - Plastics & Rubber sector.
Digital Transformation in Chemicals - Plastics & Rubber industry
- digital transformation varies from industry to industry. For Wanhua Chemical digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wanhua Chemical 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.
Superior customer experience
– The customer experience strategy of Wanhua Chemical in Chemicals - Plastics & Rubber industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Wanhua Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wanhua Chemical are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wanhua Chemical is slow explore the new channels of communication. These new channels of communication can help Wanhua Chemical to provide better information regarding Chemicals - Plastics & Rubber products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Wanhua Chemical has a high cash cycle compare to other players in the Chemicals - Plastics & Rubber industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Wanhua Chemical has some of the most successful models in the Chemicals - Plastics & Rubber industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Wanhua Chemical should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Wanhua Chemical is dominated by functional specialists. It is not different from other players in the Chemicals - Plastics & Rubber industry, but Wanhua Chemical needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wanhua Chemical to focus more on services in the Chemicals - Plastics & Rubber industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of China, Wanhua Chemical needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Wanhua Chemical 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.
Workers concerns about automation
– As automation is fast increasing in the Chemicals - Plastics & Rubber industry, Wanhua Chemical 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 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 Wanhua Chemical supply chain. Even after few cautionary changes, Wanhua Chemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wanhua Chemical vulnerable to further global disruptions in South East Asia.
Skills based hiring in Chemicals - Plastics & Rubber industry
– The stress on hiring functional specialists at Wanhua Chemical 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, Wanhua Chemical has high operating costs in the Chemicals - Plastics & Rubber industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wanhua Chemical lucrative customers.
High bargaining power of channel partners in Chemicals - Plastics & Rubber industry
– because of the regulatory requirements in China, Wanhua Chemical 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 Chemicals - Plastics & Rubber industry.
Wanhua Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wanhua Chemical are -
Loyalty marketing
– Wanhua Chemical 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.
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. Wanhua Chemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Wanhua Chemical has opened avenues for new revenue streams for the organization in Chemicals - Plastics & Rubber industry. This can help Wanhua Chemical to build a more holistic ecosystem for Wanhua Chemical products in the Chemicals - Plastics & Rubber industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemicals - Plastics & Rubber industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wanhua Chemical 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. Wanhua Chemical 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 Chemicals - Plastics & Rubber industry, but it has also influenced the consumer preferences. Wanhua Chemical can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wanhua Chemical can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Wanhua Chemical to increase its market reach. Wanhua Chemical 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.
Using analytics as competitive advantage
– Wanhua Chemical has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemicals - Plastics & Rubber sector. This continuous investment in analytics has enabled Wanhua Chemical to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wanhua Chemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Wanhua Chemical 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wanhua Chemical 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 Wanhua Chemical to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Wanhua Chemical 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wanhua Chemical 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 Wanhua Chemical to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Wanhua Chemical 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 Chemicals - Plastics & Rubber industry.
Threats Wanhua Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wanhua Chemical are -
Environmental challenges
– Wanhua Chemical 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. Wanhua Chemical can take advantage of this fund but it will also bring new competitors in the Chemicals - Plastics & Rubber industry.
Consumer confidence and its impact on Wanhua Chemical 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 Chemicals - Plastics & Rubber industry and other sectors.
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. Wanhua Chemical needs to understand the core reasons impacting the Chemicals - Plastics & Rubber industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Chemicals - Plastics & Rubber industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wanhua Chemical 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 Wanhua Chemical.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wanhua Chemical in Chemicals - Plastics & Rubber industry. The Chemicals - Plastics & Rubber industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Wanhua Chemical 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, Wanhua Chemical 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 Wanhua Chemical prominent markets.
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 Wanhua Chemical business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Wanhua Chemical has witnessed rapid integration of technology during Covid-19 in the Chemicals - Plastics & Rubber industry. As one of the leading players in the industry, Wanhua Chemical needs to keep up with the evolution of technology in the Chemicals - Plastics & Rubber 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.
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, Wanhua Chemical may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemicals - Plastics & Rubber sector.
Weighted SWOT Analysis of Wanhua Chemical Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Wanhua Chemical 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 Wanhua Chemical 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 Wanhua Chemical 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 Wanhua Chemical 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 Wanhua Chemical needs to make to build a sustainable competitive advantage.
