Shanxi LuAn Energy (601699) SWOT Analysis / TOWS Matrix / MBA Resources
Coal
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Shanxi LuAn Energy (China)
Based on various researches at Oak Spring University , Shanxi LuAn Energy is operating in a macro-environment that has been destablized by – geopolitical disruptions, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing commodity prices, increasing transportation and logistics costs, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Shanxi LuAn Energy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shanxi LuAn Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shanxi LuAn Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shanxi LuAn Energy 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 Shanxi LuAn Energy can be done for the following purposes –
1. Strategic planning of Shanxi LuAn Energy
2. Improving business portfolio management of Shanxi LuAn Energy
3. Assessing feasibility of the new initiative in China
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shanxi LuAn Energy
Strengths of Shanxi LuAn Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shanxi LuAn Energy are -
Training and development
– Shanxi LuAn Energy has one of the best training and development program in Energy 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.
Analytics focus
– Shanxi LuAn Energy 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 Coal 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.
Ability to lead change in Coal
– Shanxi LuAn Energy is one of the leading players in the Coal industry in China. Over the years it has not only transformed the business landscape in the Coal industry in China but also across the existing markets. The ability to lead change has enabled Shanxi LuAn Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Shanxi LuAn Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shanxi LuAn Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Shanxi LuAn Energy 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.
Operational resilience
– The operational resilience strategy of Shanxi LuAn Energy comprises – understanding the underlying the factors in the Coal 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.
Diverse revenue streams
– Shanxi LuAn Energy is present in almost all the verticals within the Coal industry. This has provided Shanxi LuAn Energy 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 Shanxi LuAn Energy in the Energy sector have low bargaining power. Shanxi LuAn Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shanxi LuAn Energy to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Shanxi LuAn Energy 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.
Sustainable margins compare to other players in Coal industry
– Shanxi LuAn Energy has clearly differentiated products in the market place. This has enabled Shanxi LuAn Energy to fetch slight price premium compare to the competitors in the Coal industry. The sustainable margins have also helped Shanxi LuAn Energy to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Shanxi LuAn Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shanxi LuAn Energy 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
– Shanxi LuAn Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Coal industry. Secondly the value chain collaborators of Shanxi LuAn Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Shanxi LuAn Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanxi LuAn Energy are -
No frontier risks strategy
– From the 10K / annual statement of Shanxi LuAn Energy, it seems that company is thinking out the frontier risks that can impact Coal 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 Shanxi LuAn Energy products
– To increase the profitability and margins on the products, Shanxi LuAn Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Shanxi LuAn Energy strategy
– From the outside it seems that the employees of Shanxi LuAn Energy 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.
Need for greater diversity
– Shanxi LuAn Energy 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Shanxi LuAn Energy is slow explore the new channels of communication. These new channels of communication can help Shanxi LuAn Energy to provide better information regarding Coal products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Shanxi LuAn Energy has high operating costs in the Coal industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shanxi LuAn Energy lucrative customers.
Products dominated business model
– Even though Shanxi LuAn Energy has some of the most successful models in the Coal industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Shanxi LuAn Energy should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Shanxi LuAn Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Coal industry have deep experience in developing customer relationships. Marketing department at Shanxi LuAn Energy can leverage the sales team experience to cultivate customer relationships as Shanxi LuAn Energy is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Shanxi LuAn Energy is just above the Coal 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.
Slow decision making process
– As mentioned earlier in the report, Shanxi LuAn Energy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Coal industry over the last five years. Shanxi LuAn Energy 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 Shanxi LuAn Energy ‘s star products
– The top 2 products and services of Shanxi LuAn Energy still accounts for major business revenue. This dependence on star products in Coal industry has resulted into insufficient focus on developing new products, even though Shanxi LuAn Energy has relatively successful track record of launching new products.
Shanxi LuAn Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shanxi LuAn Energy are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shanxi LuAn Energy can use these opportunities to build new business models that can help the communities that Shanxi LuAn Energy operates in. Secondly it can use opportunities from government spending in Coal sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shanxi LuAn Energy 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 Shanxi LuAn Energy to hire the very best people irrespective of their geographical location.
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 Shanxi LuAn Energy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shanxi LuAn Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Coal industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Shanxi LuAn Energy to increase its market reach. Shanxi LuAn Energy 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.
Learning at scale
– Online learning technologies has now opened space for Shanxi LuAn Energy 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.
Leveraging digital technologies
– Shanxi LuAn Energy 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.
Buying journey improvements
– Shanxi LuAn Energy can improve the customer journey of consumers in the Coal 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.
Building a culture of innovation
– managers at Shanxi LuAn Energy 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 Coal industry.
Use of Bitcoin and other crypto currencies for transactions in Coal industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Shanxi LuAn Energy in the Coal industry. Now Shanxi LuAn Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Shanxi LuAn Energy can develop new processes and procedures in Coal 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.
Creating value in data economy
– The success of analytics program of Shanxi LuAn Energy has opened avenues for new revenue streams for the organization in Coal industry. This can help Shanxi LuAn Energy to build a more holistic ecosystem for Shanxi LuAn Energy products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Shanxi LuAn Energy is facing challenges because of the dominance of functional experts in the organization. Shanxi LuAn Energy can utilize new technology in the field of Coal industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Shanxi LuAn Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shanxi LuAn Energy are -
Easy access to finance
– Easy access to finance in Coal industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Shanxi LuAn Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Shanxi LuAn Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal sector.
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 Shanxi LuAn Energy.
Increasing wage structure of Shanxi LuAn Energy
– 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 Shanxi LuAn Energy.
High dependence on third party suppliers
– Shanxi LuAn Energy 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.
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 Shanxi LuAn Energy business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Shanxi LuAn Energy 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. Shanxi LuAn Energy can take advantage of this fund but it will also bring new competitors in the Coal industry.
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 Shanxi LuAn Energy in the Coal sector and impact the bottomline of the organization.
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. Shanxi LuAn Energy 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.
Regulatory challenges
– Shanxi LuAn Energy 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 Coal industry regulations.
Technology acceleration in Forth Industrial Revolution
– Shanxi LuAn Energy has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Shanxi LuAn Energy needs to keep up with the evolution of technology in the Coal 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.
Stagnating economy with rate increase
– Shanxi LuAn Energy 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 Coal industry.
Consumer confidence and its impact on Shanxi LuAn Energy 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 Coal industry and other sectors.
Weighted SWOT Analysis of Shanxi LuAn Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shanxi LuAn Energy 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 Shanxi LuAn Energy 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 Shanxi LuAn Energy 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 Shanxi LuAn Energy 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 Shanxi LuAn Energy needs to make to build a sustainable competitive advantage.
