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 – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing energy prices, technology disruption, increasing commodity prices, there is backlash against globalization,
supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, 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 -
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.
Innovation driven organization
– Hengtong Optic Electric is one of the most innovative firm in Communications Equipment sector.
Organizational Resilience of Hengtong Optic Electric
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hengtong Optic Electric does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Hengtong Optic Electric comprises – understanding the underlying the factors in the Communications Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Hengtong Optic Electric 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 Hengtong Optic Electric is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hengtong Optic Electric emphasize – knowledge, initiative, and innovation.
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.
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.
Superior customer experience
– The customer experience strategy of Hengtong Optic Electric in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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 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.
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.
Employees’ less understanding of Hengtong Optic Electric strategy
– From the outside it seems that the employees of Hengtong Optic Electric don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee of 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.
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.
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.
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.
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 Hengtong Optic Electric supply chain. Even after few cautionary changes, Hengtong Optic Electric is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hengtong Optic Electric vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hengtong Optic Electric is slow explore the new channels of communication. These new channels of communication can help Hengtong Optic Electric to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.
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.
Need for greater diversity
– Hengtong Optic Electric 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.
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.
Developing new processes and practices
– Hengtong Optic Electric can develop new processes and procedures in Communications Equipment 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. Hengtong Optic Electric can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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 Hengtong Optic Electric 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.
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.
Better consumer reach
– The expansion of the 5G network will help Hengtong Optic Electric to increase its market reach. Hengtong Optic Electric 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.
Use of Bitcoin and other crypto currencies for transactions in Communications Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hengtong Optic Electric in the Communications Equipment industry. Now Hengtong Optic Electric can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
Loyalty marketing
– Hengtong Optic Electric 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.
Creating value in data economy
– The success of analytics program of Hengtong Optic Electric has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help Hengtong Optic Electric to build a more holistic ecosystem for Hengtong Optic Electric products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 -
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.
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.
Increasing wage structure of Hengtong Optic Electric
– 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 Hengtong Optic Electric.
Easy access to finance
– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hengtong Optic Electric can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hengtong Optic Electric in the Communications Equipment sector and impact the bottomline of the organization.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hengtong Optic Electric in Communications Equipment industry. The Communications Equipment 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.
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.
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.
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.
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.
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.
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.
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.