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 – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, supply chains are disrupted by pandemic , 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.
Low bargaining power of suppliers
– Suppliers of Wanhua Chemical in the Basic Materials sector have low bargaining power. Wanhua Chemical has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wanhua Chemical to manage not only supply disruptions but also source products at highly competitive prices.
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.
Effective Research and Development (R&D)
– Wanhua Chemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Wanhua Chemical staying ahead in the Chemicals - Plastics & Rubber industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Wanhua Chemical
– The covid-19 pandemic has put organizational resilience at the centre of everthing Wanhua Chemical does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Wanhua Chemical 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.
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.
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.
Analytics focus
– Wanhua Chemical 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 Chemicals - Plastics & Rubber 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.
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.
Weaknesses of Wanhua Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wanhua Chemical are -
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.
High dependence on Wanhua Chemical ‘s star products
– The top 2 products and services of Wanhua Chemical still accounts for major business revenue. This dependence on star products in Chemicals - Plastics & Rubber industry has resulted into insufficient focus on developing new products, even though Wanhua Chemical has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Wanhua Chemical 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 Chemicals - Plastics & Rubber industry using digital technology.
Lack of clear differentiation of Wanhua Chemical products
– To increase the profitability and margins on the products, Wanhua Chemical needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
Interest costs
– Compare to the competition, Wanhua Chemical has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
Slow decision making process
– As mentioned earlier in the report, Wanhua Chemical has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemicals - Plastics & Rubber industry over the last five years. Wanhua Chemical 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
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.
Aligning sales with marketing
– From the outside it seems that Wanhua Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemicals - Plastics & Rubber industry have deep experience in developing customer relationships. Marketing department at Wanhua Chemical can leverage the sales team experience to cultivate customer relationships as Wanhua Chemical is planning to shift buying processes online.
Wanhua Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wanhua Chemical are -
Manufacturing automation
– Wanhua Chemical can use the latest technology developments to improve its manufacturing and designing process in Chemicals - Plastics & Rubber 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wanhua Chemical is facing challenges because of the dominance of functional experts in the organization. Wanhua Chemical can utilize new technology in the field of Chemicals - Plastics & Rubber industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
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.
Buying journey improvements
– Wanhua Chemical can improve the customer journey of consumers in the Chemicals - Plastics & Rubber 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.
Learning at scale
– Online learning technologies has now opened space for Wanhua Chemical 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.
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.
Use of Bitcoin and other crypto currencies for transactions in Chemicals - Plastics & Rubber industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wanhua Chemical in the Chemicals - Plastics & Rubber industry. Now Wanhua Chemical can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wanhua Chemical can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Wanhua Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wanhua Chemical are -
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.
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.
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.
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.
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 Wanhua Chemical in the Chemicals - Plastics & Rubber sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Wanhua Chemical 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 Chemicals - Plastics & Rubber industry.
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.
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.
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.
Regulatory challenges
– Wanhua Chemical 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 Chemicals - Plastics & Rubber industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemicals - Plastics & Rubber industry are lowering. It can presents Wanhua Chemical with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemicals - Plastics & Rubber sector.
Increasing wage structure of Wanhua Chemical
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wanhua Chemical.
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.
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.