Shandong Xinchao Energy (600777) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Shandong Xinchao Energy (China)

Based on various researches at Oak Spring University , Shandong Xinchao Energy is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Shandong Xinchao Energy

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

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Shandong Xinchao Energy can be done for the following purposes –
1. Strategic planning of Shandong Xinchao Energy
2. Improving business portfolio management of Shandong Xinchao Energy
3. Assessing feasibility of the new initiative in China
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shandong Xinchao Energy

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Strengths of Shandong Xinchao Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Shandong Xinchao Energy are -

Highly skilled collaborators

– Shandong Xinchao Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Shandong Xinchao Energy have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Construction Services industry

– Shandong Xinchao Energy has clearly differentiated products in the market place. This has enabled Shandong Xinchao Energy to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Shandong Xinchao Energy to invest into research and development (R&D) and innovation.

Superior customer experience

– The customer experience strategy of Shandong Xinchao Energy in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Organizational Resilience of Shandong Xinchao Energy

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

Effective Research and Development (R&D)

– Shandong Xinchao Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Shandong Xinchao Energy staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High brand equity

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

Analytics focus

– Shandong Xinchao 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 Construction Services 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.

Cross disciplinary teams

– Horizontal connected teams at the Shandong Xinchao 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.

Successful track record of launching new products

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

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For Shandong Xinchao Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Shandong Xinchao Energy 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.

Learning organization

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

Innovation driven organization

– Shandong Xinchao Energy is one of the most innovative firm in Construction Services sector.

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Weaknesses of Shandong Xinchao Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Shandong Xinchao Energy are -

Need for greater diversity

– Shandong Xinchao 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.

No frontier risks strategy

– From the 10K / annual statement of Shandong Xinchao Energy, it seems that company is thinking out the frontier risks that can impact Construction Services 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.

Interest costs

– Compare to the competition, Shandong Xinchao Energy has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Employees’ less understanding of Shandong Xinchao Energy strategy

– From the outside it seems that the employees of Shandong Xinchao 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.

Slow decision making process

– As mentioned earlier in the report, Shandong Xinchao 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 Construction Services industry over the last five years. Shandong Xinchao 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.

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, Shandong Xinchao Energy 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.

Ability to respond to the competition

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

Lack of clear differentiation of Shandong Xinchao Energy products

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

Compensation and incentives

– The revenue per employee of Shandong Xinchao Energy is just above the Construction Services 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.

Low market penetration in new markets

– Outside its home market of China, Shandong Xinchao Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Shandong Xinchao Energy is slow explore the new channels of communication. These new channels of communication can help Shandong Xinchao Energy to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

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Shandong Xinchao Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Shandong Xinchao Energy are -

Creating value in data economy

– The success of analytics program of Shandong Xinchao Energy has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Shandong Xinchao Energy to build a more holistic ecosystem for Shandong Xinchao Energy products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Manufacturing automation

– Shandong Xinchao Energy can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.

Using analytics as competitive advantage

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shandong Xinchao Energy can use these opportunities to build new business models that can help the communities that Shandong Xinchao Energy operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shandong Xinchao 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 Shandong Xinchao Energy to hire the very best people irrespective of their geographical location.

Better consumer reach

– The expansion of the 5G network will help Shandong Xinchao Energy to increase its market reach. Shandong Xinchao 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.

Leveraging digital technologies

– Shandong Xinchao 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Shandong Xinchao Energy is facing challenges because of the dominance of functional experts in the organization. Shandong Xinchao Energy can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Low interest rates

– Even though inflation is raising its head in most developed economies, Shandong Xinchao Energy 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.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Shandong Xinchao Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Learning at scale

– Online learning technologies has now opened space for Shandong Xinchao 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.

Buying journey improvements

– Shandong Xinchao Energy can improve the customer journey of consumers in the Construction Services 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.

Use of Bitcoin and other crypto currencies for transactions in Construction Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Shandong Xinchao Energy in the Construction Services industry. Now Shandong Xinchao Energy can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats Shandong Xinchao Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Shandong Xinchao Energy are -

Regulatory challenges

– Shandong Xinchao 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 Construction Services industry regulations.

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.

Shortening product life cycle

– it is one of the major threat that Shandong Xinchao Energy is facing in Construction Services 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. Shandong Xinchao 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.

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 Shandong Xinchao Energy.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Shandong Xinchao Energy 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 Shandong Xinchao Energy prominent markets.

Increasing wage structure of Shandong Xinchao 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 Shandong Xinchao Energy.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Shandong Xinchao Energy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.

Consumer confidence and its impact on Shandong Xinchao 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 Construction Services industry and other sectors.

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.

Stagnating economy with rate increase

– Shandong Xinchao 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 Construction Services industry.

Environmental challenges

– Shandong Xinchao 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. Shandong Xinchao Energy can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Shandong Xinchao Energy in Construction Services industry. The Construction Services 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.

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Weighted SWOT Analysis of Shandong Xinchao Energy Template, Example

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

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