SWOT Analysis / TOWS Matrix for Hongfa Tech (China)
Based on various researches at Oak Spring University , Hongfa Tech is operating in a macro-environment that has been destablized by – increasing commodity prices, there is backlash against globalization, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
challanges to central banks by blockchain based private currencies, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hongfa Tech can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hongfa Tech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hongfa Tech 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 Hongfa Tech can be done for the following purposes –
1. Strategic planning of Hongfa Tech
2. Improving business portfolio management of Hongfa Tech
3. Assessing feasibility of the new initiative in China
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hongfa Tech
Strengths of Hongfa Tech | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hongfa Tech are -
Successful track record of launching new products
– Hongfa Tech has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hongfa Tech 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.
Strong track record of project management in the Electronic Instr. & Controls industry
– Hongfa Tech is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Hongfa Tech 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 Hongfa Tech is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hongfa Tech emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– Hongfa Tech has clearly differentiated products in the market place. This has enabled Hongfa Tech to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped Hongfa Tech to invest into research and development (R&D) and innovation.
Organizational Resilience of Hongfa Tech
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hongfa Tech does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Hongfa Tech in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Hongfa Tech has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hongfa Tech staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Hongfa Tech has one of the best training and development program in Technology 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.
Low bargaining power of suppliers
– Suppliers of Hongfa Tech in the Technology sector have low bargaining power. Hongfa Tech has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hongfa Tech to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Hongfa Tech comprises – understanding the underlying the factors in the Electronic Instr. & Controls 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.
Highly skilled collaborators
– Hongfa Tech has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electronic Instr. & Controls industry. Secondly the value chain collaborators of Hongfa Tech have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Electronic Instr. & Controls
– Hongfa Tech is one of the leading players in the Electronic Instr. & Controls industry in China. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in China but also across the existing markets. The ability to lead change has enabled Hongfa Tech in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Hongfa Tech | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hongfa Tech are -
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, Hongfa Tech 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
Hongfa Tech has a high cash cycle compare to other players in the Electronic Instr. & Controls industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hongfa Tech is slow explore the new channels of communication. These new channels of communication can help Hongfa Tech to provide better information regarding Electronic Instr. & Controls products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Hongfa Tech is just above the Electronic Instr. & Controls 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.
High dependence on Hongfa Tech ‘s star products
– The top 2 products and services of Hongfa Tech still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though Hongfa Tech has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Hongfa Tech has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electronic Instr. & Controls industry over the last five years. Hongfa Tech 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 bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in China, Hongfa Tech 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 Electronic Instr. & Controls industry.
Skills based hiring in Electronic Instr. & Controls industry
– The stress on hiring functional specialists at Hongfa Tech 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.
Products dominated business model
– Even though Hongfa Tech has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hongfa Tech should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Hongfa Tech has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Electronic Instr. & Controls industry using digital technology.
Employees’ less understanding of Hongfa Tech strategy
– From the outside it seems that the employees of Hongfa Tech 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.
Hongfa Tech Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hongfa Tech are -
Developing new processes and practices
– Hongfa Tech can develop new processes and procedures in Electronic Instr. & Controls 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hongfa Tech can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hongfa Tech can use these opportunities to build new business models that can help the communities that Hongfa Tech operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hongfa Tech in the Electronic Instr. & Controls industry. Now Hongfa Tech can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hongfa Tech 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.
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 Hongfa Tech 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.
Learning at scale
– Online learning technologies has now opened space for Hongfa Tech to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Hongfa Tech has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled Hongfa Tech to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hongfa Tech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Hongfa Tech 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.
Manufacturing automation
– Hongfa Tech can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls 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.
Loyalty marketing
– Hongfa Tech 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Electronic Instr. & Controls industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hongfa Tech 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. Hongfa Tech 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.
Buying journey improvements
– Hongfa Tech can improve the customer journey of consumers in the Electronic Instr. & Controls 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.
Threats Hongfa Tech External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hongfa Tech are -
Increasing wage structure of Hongfa Tech
– 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 Hongfa Tech.
Regulatory challenges
– Hongfa Tech 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 Electronic Instr. & Controls industry regulations.
Consumer confidence and its impact on Hongfa Tech 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 Electronic Instr. & Controls industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hongfa Tech may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hongfa Tech in Electronic Instr. & Controls industry. The Electronic Instr. & Controls 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.
High dependence on third party suppliers
– Hongfa Tech 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 Hongfa Tech business can come under increasing regulations regarding data privacy, data security, etc.
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 Hongfa Tech in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Hongfa Tech 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 Electronic Instr. & Controls industry.
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. Hongfa Tech needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
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 Hongfa Tech.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hongfa Tech 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 Hongfa Tech prominent markets.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Hongfa Tech Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hongfa Tech 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 Hongfa Tech 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 Hongfa Tech 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 Hongfa Tech 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 Hongfa Tech needs to make to build a sustainable competitive advantage.