AVIC Capital (600705) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AVIC Capital (China)

Based on various researches at Oak Spring University , AVIC Capital is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, technology disruption, there is increasing trade war between United States & China, increasing transportation and logistics costs, geopolitical disruptions, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of AVIC Capital

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

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Strengths of AVIC Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of AVIC Capital are -

Superior customer experience

– The customer experience strategy of AVIC Capital in Rental & Leasing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Organizational Resilience of AVIC Capital

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

Sustainable margins compare to other players in Rental & Leasing industry

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

Training and development

– AVIC Capital has one of the best training and development program in Services 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.

Diverse revenue streams

– AVIC Capital is present in almost all the verticals within the Rental & Leasing industry. This has provided AVIC Capital 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.

Strong track record of project management in the Rental & Leasing industry

– AVIC Capital 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

– AVIC Capital has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Rental & Leasing industry. Secondly the value chain collaborators of AVIC Capital have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

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

High switching costs

– The high switching costs that AVIC Capital 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.

Ability to lead change in Rental & Leasing

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

Analytics focus

– AVIC Capital 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 Rental & Leasing 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 Rental & Leasing industry

- digital transformation varies from industry to industry. For AVIC Capital digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AVIC Capital 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 AVIC Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of AVIC Capital are -

Employees’ less understanding of AVIC Capital strategy

– From the outside it seems that the employees of AVIC Capital 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.

Skills based hiring in Rental & Leasing industry

– The stress on hiring functional specialists at AVIC Capital 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 cash cycle compare to competitors

AVIC Capital has a high cash cycle compare to other players in the Rental & Leasing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Compensation and incentives

– The revenue per employee of AVIC Capital is just above the Rental & Leasing 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.

Lack of clear differentiation of AVIC Capital products

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AVIC Capital is slow explore the new channels of communication. These new channels of communication can help AVIC Capital to provide better information regarding Rental & Leasing products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, AVIC Capital has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Rental & Leasing industry over the last five years. AVIC Capital 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 dependence on AVIC Capital ‘s star products

– The top 2 products and services of AVIC Capital still accounts for major business revenue. This dependence on star products in Rental & Leasing industry has resulted into insufficient focus on developing new products, even though AVIC Capital has relatively successful track record of launching new products.

High operating costs

– Compare to the competitors, AVIC Capital has high operating costs in the Rental & Leasing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract AVIC Capital lucrative customers.

Need for greater diversity

– AVIC Capital 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.

No frontier risks strategy

– From the 10K / annual statement of AVIC Capital, it seems that company is thinking out the frontier risks that can impact Rental & Leasing 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.

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AVIC Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of AVIC Capital are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AVIC Capital 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 AVIC Capital to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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. AVIC Capital can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AVIC Capital 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 AVIC Capital to hire the very best people irrespective of their geographical location.

Developing new processes and practices

– AVIC Capital can develop new processes and procedures in Rental & Leasing 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, AVIC Capital 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 AVIC Capital to increase its market reach. AVIC Capital 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Rental & Leasing industry, but it has also influenced the consumer preferences. AVIC Capital can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Loyalty marketing

– AVIC Capital 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.

Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AVIC Capital in the Rental & Leasing industry. Now AVIC Capital can target international markets with far fewer capital restrictions requirements than the existing system.

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 AVIC Capital 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.

Redefining models of collaboration and team work

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

Building a culture of innovation

– managers at AVIC Capital 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 Rental & Leasing industry.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects AVIC Capital can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats AVIC Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of AVIC Capital are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Rental & Leasing industry are lowering. It can presents AVIC Capital with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Rental & Leasing sector.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, AVIC Capital may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Rental & Leasing 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. AVIC Capital needs to understand the core reasons impacting the Rental & Leasing industry. This will help it in building a better workplace.

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 AVIC Capital 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. AVIC Capital 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.

Consumer confidence and its impact on AVIC Capital 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 Rental & Leasing industry and other sectors.

Stagnating economy with rate increase

– AVIC Capital 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 Rental & Leasing industry.

Increasing wage structure of AVIC Capital

– 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 AVIC Capital.

High dependence on third party suppliers

– AVIC Capital 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.

Regulatory challenges

– AVIC Capital 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 Rental & Leasing industry regulations.

Environmental challenges

– AVIC Capital 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. AVIC Capital can take advantage of this fund but it will also bring new competitors in the Rental & Leasing industry.

Technology acceleration in Forth Industrial Revolution

– AVIC Capital has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, AVIC Capital needs to keep up with the evolution of technology in the Rental & Leasing 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, AVIC Capital 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 AVIC Capital prominent markets.

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Weighted SWOT Analysis of AVIC Capital Template, Example

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

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