China Aerospace (600879) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Aerospace (China)

Based on various researches at Oak Spring University , China Aerospace is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, increasing energy prices, 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%, increasing commodity prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of China Aerospace

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Aerospace can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Aerospace, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Aerospace 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of China Aerospace can be done for the following purposes –
1. Strategic planning of China Aerospace
2. Improving business portfolio management of China Aerospace
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 China Aerospace

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Strengths of China Aerospace | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of China Aerospace are -

High switching costs

– The high switching costs that China Aerospace 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.

Effective Research and Development (R&D)

– China Aerospace has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Aerospace 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.

Analytics focus

– China Aerospace 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.

Strong track record of project management in the Communications Equipment industry

– China Aerospace is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Ability to lead change in Communications Equipment

– China Aerospace is one of the leading players in the Communications Equipment industry in China. Over the years it has not only transformed the business landscape in the Communications Equipment industry in China but also across the existing markets. The ability to lead change has enabled China Aerospace in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the China Aerospace 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 China Aerospace 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.

Successful track record of launching new products

– China Aerospace has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Aerospace 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.

Innovation driven organization

– China Aerospace is one of the most innovative firm in Communications Equipment sector.

High brand equity

– China Aerospace has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Aerospace to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Organizational Resilience of China Aerospace

– The covid-19 pandemic has put organizational resilience at the centre of everthing China Aerospace does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Learning organization

- China Aerospace 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 China Aerospace is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Aerospace emphasize – knowledge, initiative, and innovation.

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Weaknesses of China Aerospace | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of China Aerospace are -

No frontier risks strategy

– From the 10K / annual statement of China Aerospace, 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.

Skills based hiring in Communications Equipment industry

– The stress on hiring functional specialists at China Aerospace 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.

Lack of clear differentiation of China Aerospace products

– To increase the profitability and margins on the products, China Aerospace needs to provide more differentiated products than what it is currently offering in the marketplace.

High bargaining power of channel partners in Communications Equipment industry

– because of the regulatory requirements in China, China Aerospace 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 cash cycle compare to competitors

China Aerospace 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.

Workers concerns about automation

– As automation is fast increasing in the Communications Equipment industry, China Aerospace 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.

Increasing silos among functional specialists

– The organizational structure of China Aerospace is dominated by functional specialists. It is not different from other players in the Communications Equipment industry, but China Aerospace needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Aerospace to focus more on services in the Communications Equipment industry rather than just following the product oriented approach.

Need for greater diversity

– China Aerospace 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.

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 China Aerospace supply chain. Even after few cautionary changes, China Aerospace is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Aerospace vulnerable to further global disruptions in South East Asia.

Products dominated business model

– Even though China Aerospace has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Aerospace should strive to include more intangible value offerings along with its core products and services.

Ability to respond to the competition

– As the decision making is very deliberative at China Aerospace, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. China Aerospace has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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China Aerospace Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of China Aerospace 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, China Aerospace can use these opportunities to build new business models that can help the communities that China Aerospace 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 China Aerospace to increase its market reach. China Aerospace 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.

Manufacturing automation

– China Aerospace 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.

Loyalty marketing

– China Aerospace 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 Communications Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Aerospace 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. China Aerospace 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for China Aerospace in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Communications Equipment industry, and it will provide faster access to the consumers.

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 China Aerospace in the Communications Equipment industry. Now China Aerospace can target international markets with far fewer capital restrictions requirements than the existing system.

Leveraging digital technologies

– China Aerospace 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects China Aerospace can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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 China Aerospace 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.

Using analytics as competitive advantage

– China Aerospace has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled China Aerospace to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Aerospace to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Developing new processes and practices

– China Aerospace 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, China Aerospace 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 China Aerospace to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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Threats China Aerospace External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of China Aerospace are -

Stagnating economy with rate increase

– China Aerospace 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.

High dependence on third party suppliers

– China Aerospace 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.

Consumer confidence and its impact on China Aerospace 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 Communications Equipment industry and other sectors.

Environmental challenges

– China Aerospace 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. China Aerospace can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents China Aerospace with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, China Aerospace 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 China Aerospace 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 China Aerospace in the Communications Equipment sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– China Aerospace has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, China Aerospace needs to keep up with the evolution of technology in the Communications Equipment 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.

Shortening product life cycle

– it is one of the major threat that China Aerospace is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. China Aerospace 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

– China Aerospace 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.

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.

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 China Aerospace.

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Weighted SWOT Analysis of China Aerospace Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Aerospace 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 China Aerospace 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 China Aerospace 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 China Aerospace 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 China Aerospace needs to make to build a sustainable competitive advantage.

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