Hengtong Optic Electric (600487) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hengtong Optic Electric (China)
Based on various researches at Oak Spring University , Hengtong Optic Electric is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing transportation and logistics costs, increasing energy prices, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Hengtong Optic Electric
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hengtong Optic Electric can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hengtong Optic Electric, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hengtong Optic Electric 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 Hengtong Optic Electric can be done for the following purposes –
1. Strategic planning of Hengtong Optic Electric
2. Improving business portfolio management of Hengtong Optic Electric
3. Assessing feasibility of the new initiative in China
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hengtong Optic Electric
Strengths of Hengtong Optic Electric | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hengtong Optic Electric are -
Low bargaining power of suppliers
– Suppliers of Hengtong Optic Electric in the Technology sector have low bargaining power. Hengtong Optic Electric has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hengtong Optic Electric to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Communications Equipment industry
– Hengtong Optic Electric 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 Hengtong Optic Electric 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.
Innovation driven organization
– Hengtong Optic Electric is one of the most innovative firm in Communications Equipment sector.
Analytics focus
– Hengtong Optic Electric 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 Communications Equipment 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.
Successful track record of launching new products
– Hengtong Optic Electric has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hengtong Optic Electric 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.
Diverse revenue streams
– Hengtong Optic Electric is present in almost all the verticals within the Communications Equipment industry. This has provided Hengtong Optic Electric 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 lead change in Communications Equipment
– Hengtong Optic Electric is one of the leading players in the Communications Equipment industry in China. Over the years it has not only transformed the business landscape in the Communications Equipment industry in China but also across the existing markets. The ability to lead change has enabled Hengtong Optic Electric in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Hengtong Optic Electric has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hengtong Optic Electric to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Hengtong Optic Electric has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hengtong Optic Electric staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Communications Equipment industry
- digital transformation varies from industry to industry. For Hengtong Optic Electric digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hengtong Optic Electric 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.
Highly skilled collaborators
– Hengtong Optic Electric has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Equipment industry. Secondly the value chain collaborators of Hengtong Optic Electric have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Hengtong Optic Electric | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hengtong Optic Electric are -
High dependence on Hengtong Optic Electric ‘s star products
– The top 2 products and services of Hengtong Optic Electric still accounts for major business revenue. This dependence on star products in Communications Equipment industry has resulted into insufficient focus on developing new products, even though Hengtong Optic Electric has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Hengtong Optic Electric is one of the leading players in the Communications Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Equipment industry in last five years.
Skills based hiring in Communications Equipment industry
– The stress on hiring functional specialists at Hengtong Optic Electric 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.
Low market penetration in new markets
– Outside its home market of China, Hengtong Optic Electric needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Communications Equipment industry
– because of the regulatory requirements in China, Hengtong Optic Electric 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 Communications Equipment industry.
No frontier risks strategy
– From the 10K / annual statement of Hengtong Optic Electric, it seems that company is thinking out the frontier risks that can impact Communications Equipment 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.
Lack of clear differentiation of Hengtong Optic Electric products
– To increase the profitability and margins on the products, Hengtong Optic Electric needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Hengtong Optic Electric has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hengtong Optic Electric should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Hengtong Optic Electric is just above the Communications Equipment 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.
Workers concerns about automation
– As automation is fast increasing in the Communications Equipment industry, Hengtong Optic Electric 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
Hengtong Optic Electric has a high cash cycle compare to other players in the Communications Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Hengtong Optic Electric Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hengtong Optic Electric are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hengtong Optic Electric is facing challenges because of the dominance of functional experts in the organization. Hengtong Optic Electric can utilize new technology in the field of Communications Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Hengtong Optic Electric 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hengtong Optic Electric 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hengtong Optic Electric 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 Hengtong Optic Electric 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 Hengtong Optic Electric 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 Hengtong Optic Electric to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hengtong Optic Electric can use these opportunities to build new business models that can help the communities that Hengtong Optic Electric operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.
Buying journey improvements
– Hengtong Optic Electric can improve the customer journey of consumers in the Communications Equipment 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.
Leveraging digital technologies
– Hengtong Optic Electric 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.
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. Hengtong Optic Electric can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Hengtong Optic Electric 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 Communications Equipment industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Communications Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hengtong Optic Electric 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. Hengtong Optic Electric 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.
Using analytics as competitive advantage
– Hengtong Optic Electric has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Hengtong Optic Electric to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hengtong Optic Electric to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Hengtong Optic Electric can use the latest technology developments to improve its manufacturing and designing process in Communications Equipment 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.
Threats Hengtong Optic Electric External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hengtong Optic Electric are -
Environmental challenges
– Hengtong Optic Electric 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. Hengtong Optic Electric can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.
Stagnating economy with rate increase
– Hengtong Optic Electric 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 Communications Equipment industry.
Regulatory challenges
– Hengtong Optic Electric 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 Communications Equipment industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents Hengtong Optic Electric with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.
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. Hengtong Optic Electric 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.
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 Hengtong Optic Electric business can come under increasing regulations regarding data privacy, data security, etc.
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 Hengtong Optic Electric.
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 Hengtong Optic Electric in the Communications Equipment sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that Hengtong Optic Electric is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hengtong Optic Electric may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Equipment sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hengtong Optic Electric 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 Hengtong Optic Electric prominent markets.
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. Hengtong Optic Electric needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Hengtong Optic Electric Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hengtong Optic Electric 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 Hengtong Optic Electric 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 Hengtong Optic Electric 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 Hengtong Optic Electric 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 Hengtong Optic Electric needs to make to build a sustainable competitive advantage.
