Chongqing Iron Steel (601005) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Chongqing Iron Steel (China)
Based on various researches at Oak Spring University , Chongqing Iron Steel is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing commodity prices, wage bills are increasing, challanges to central banks by blockchain based private currencies,
increasing transportation and logistics costs, there is backlash against globalization, etc
Introduction to SWOT Analysis of Chongqing Iron Steel
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Chongqing Iron Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chongqing Iron Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chongqing Iron Steel 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 Chongqing Iron Steel can be done for the following purposes –
1. Strategic planning of Chongqing Iron Steel
2. Improving business portfolio management of Chongqing Iron Steel
3. Assessing feasibility of the new initiative in China
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chongqing Iron Steel
Strengths of Chongqing Iron Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chongqing Iron Steel are -
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Chongqing Iron Steel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chongqing Iron Steel 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.
Analytics focus
– Chongqing Iron Steel 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 Iron & Steel 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 Iron & Steel
– Chongqing Iron Steel is one of the leading players in the Iron & Steel industry in China. Over the years it has not only transformed the business landscape in the Iron & Steel industry in China but also across the existing markets. The ability to lead change has enabled Chongqing Iron Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Iron & Steel industry
– Chongqing Iron Steel has clearly differentiated products in the market place. This has enabled Chongqing Iron Steel to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Chongqing Iron Steel to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Chongqing Iron Steel is present in almost all the verticals within the Iron & Steel industry. This has provided Chongqing Iron Steel 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 Chongqing Iron Steel in the Basic Materials sector have low bargaining power. Chongqing Iron Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chongqing Iron Steel to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Chongqing Iron Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing Chongqing Iron Steel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Chongqing Iron Steel 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.
Cross disciplinary teams
– Horizontal connected teams at the Chongqing Iron Steel 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
– Chongqing Iron Steel is one of the most innovative firm in Iron & Steel sector.
High brand equity
– Chongqing Iron Steel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chongqing Iron Steel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Chongqing Iron Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Chongqing Iron Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chongqing Iron Steel are -
Aligning sales with marketing
– From the outside it seems that Chongqing Iron Steel needs to have more collaboration between its sales team and marketing team. Sales professionals in the Iron & Steel industry have deep experience in developing customer relationships. Marketing department at Chongqing Iron Steel can leverage the sales team experience to cultivate customer relationships as Chongqing Iron Steel is planning to shift buying processes online.
Employees’ less understanding of Chongqing Iron Steel strategy
– From the outside it seems that the employees of Chongqing Iron Steel 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.
High operating costs
– Compare to the competitors, Chongqing Iron Steel has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chongqing Iron Steel lucrative customers.
High cash cycle compare to competitors
Chongqing Iron Steel has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 Chongqing Iron Steel supply chain. Even after few cautionary changes, Chongqing Iron Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chongqing Iron Steel 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, Chongqing Iron Steel is slow explore the new channels of communication. These new channels of communication can help Chongqing Iron Steel to provide better information regarding Iron & Steel 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 Chongqing Iron Steel is just above the Iron & Steel 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 to strategic competitive environment developments
– As Chongqing Iron Steel is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.
Lack of clear differentiation of Chongqing Iron Steel products
– To increase the profitability and margins on the products, Chongqing Iron Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Chongqing Iron Steel ‘s star products
– The top 2 products and services of Chongqing Iron Steel still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though Chongqing Iron Steel has relatively successful track record of launching new products.
Need for greater diversity
– Chongqing Iron Steel 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.
Chongqing Iron Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chongqing Iron Steel are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chongqing Iron Steel is facing challenges because of the dominance of functional experts in the organization. Chongqing Iron Steel can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chongqing Iron Steel 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 Chongqing Iron Steel to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chongqing Iron Steel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
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 Chongqing Iron Steel 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.
Buying journey improvements
– Chongqing Iron Steel can improve the customer journey of consumers in the Iron & Steel 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chongqing Iron Steel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chongqing Iron Steel 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chongqing Iron Steel can use these opportunities to build new business models that can help the communities that Chongqing Iron Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. Chongqing Iron Steel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Chongqing Iron Steel to increase its market reach. Chongqing Iron Steel 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 Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Chongqing Iron Steel in the Iron & Steel industry. Now Chongqing Iron Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Chongqing Iron Steel has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Chongqing Iron Steel to build a more holistic ecosystem for Chongqing Iron Steel products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chongqing Iron Steel 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 Chongqing Iron Steel to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Chongqing Iron Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chongqing Iron Steel are -
Consumer confidence and its impact on Chongqing Iron Steel 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 Iron & Steel industry and other sectors.
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 Chongqing Iron Steel business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Chongqing Iron Steel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chongqing Iron Steel in Iron & Steel industry. The Iron & Steel 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.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Chongqing Iron Steel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chongqing Iron Steel 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 Chongqing Iron Steel prominent markets.
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 Chongqing Iron Steel in the Iron & Steel 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. Chongqing Iron Steel 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
– Chongqing Iron Steel 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 Iron & Steel industry regulations.
Environmental challenges
– Chongqing Iron Steel 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. Chongqing Iron Steel can take advantage of this fund but it will also bring new competitors in the Iron & Steel 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. Chongqing Iron Steel needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Chongqing Iron Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Chongqing Iron Steel 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 Chongqing Iron Steel 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 Chongqing Iron Steel 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 Chongqing Iron Steel 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 Chongqing Iron Steel needs to make to build a sustainable competitive advantage.