Shanghai AJ (600643) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Shanghai AJ (China)

Based on various researches at Oak Spring University , Shanghai AJ is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, geopolitical disruptions, there is backlash against globalization, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Shanghai AJ

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shanghai AJ can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shanghai AJ, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shanghai AJ 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 Shanghai AJ can be done for the following purposes –
1. Strategic planning of Shanghai AJ
2. Improving business portfolio management of Shanghai AJ
3. Assessing feasibility of the new initiative in China
4. Making a Recreational Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shanghai AJ

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Strengths of Shanghai AJ | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Shanghai AJ are -

Successful track record of launching new products

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

Organizational Resilience of Shanghai AJ

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

Ability to recruit top talent

– Shanghai AJ is one of the leading players in the Recreational Products industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.

Superior customer experience

– The customer experience strategy of Shanghai AJ in Recreational Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Shanghai AJ 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 Recreational Products 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.

Innovation driven organization

– Shanghai AJ is one of the most innovative firm in Recreational Products sector.

Training and development

– Shanghai AJ has one of the best training and development program in Consumer Cyclical 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.

High brand equity

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

Highly skilled collaborators

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

Ability to lead change in Recreational Products

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

Digital Transformation in Recreational Products industry

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

Low bargaining power of suppliers

– Suppliers of Shanghai AJ in the Consumer Cyclical sector have low bargaining power. Shanghai AJ has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shanghai AJ to manage not only supply disruptions but also source products at highly competitive prices.

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Weaknesses of Shanghai AJ | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Shanghai AJ are -

High cash cycle compare to competitors

Shanghai AJ has a high cash cycle compare to other players in the Recreational Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

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

Skills based hiring in Recreational Products industry

– The stress on hiring functional specialists at Shanghai AJ 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.

High dependence on Shanghai AJ ‘s star products

– The top 2 products and services of Shanghai AJ still accounts for major business revenue. This dependence on star products in Recreational Products industry has resulted into insufficient focus on developing new products, even though Shanghai AJ has relatively successful track record of launching new products.

Slow to harness new channels of communication

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

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

Increasing silos among functional specialists

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

Aligning sales with marketing

– From the outside it seems that Shanghai AJ needs to have more collaboration between its sales team and marketing team. Sales professionals in the Recreational Products industry have deep experience in developing customer relationships. Marketing department at Shanghai AJ can leverage the sales team experience to cultivate customer relationships as Shanghai AJ is planning to shift buying processes online.

Compensation and incentives

– The revenue per employee of Shanghai AJ is just above the Recreational Products 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.

Need for greater diversity

– Shanghai AJ 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 operating costs

– Compare to the competitors, Shanghai AJ has high operating costs in the Recreational Products industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shanghai AJ lucrative customers.

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Shanghai AJ Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Shanghai AJ are -

Reforming the budgeting process

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

Creating value in data economy

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

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 Shanghai AJ 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.

Loyalty marketing

– Shanghai AJ 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.

Using analytics as competitive advantage

– Shanghai AJ has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Recreational Products sector. This continuous investment in analytics has enabled Shanghai AJ to build a competitive advantage using analytics. The analytics driven competitive advantage can help Shanghai AJ 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, Shanghai AJ can use these opportunities to build new business models that can help the communities that Shanghai AJ operates in. Secondly it can use opportunities from government spending in Recreational Products sector.

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. Shanghai AJ can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Better consumer reach

– The expansion of the 5G network will help Shanghai AJ to increase its market reach. Shanghai AJ 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Recreational Products industry, but it has also influenced the consumer preferences. Shanghai AJ can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Remote work and new talent hiring opportunities

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Shanghai AJ 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Recreational Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Shanghai AJ 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. Shanghai AJ 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

– Shanghai AJ can improve the customer journey of consumers in the Recreational Products 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.

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Threats Shanghai AJ External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Shanghai AJ are -

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 Shanghai AJ business can come under increasing regulations regarding data privacy, data security, etc.

Barriers of entry lowering

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

Environmental challenges

– Shanghai AJ 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. Shanghai AJ can take advantage of this fund but it will also bring new competitors in the Recreational Products industry.

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.

Easy access to finance

– Easy access to finance in Recreational Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Shanghai AJ can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Consumer confidence and its impact on Shanghai AJ 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 Recreational Products industry and other sectors.

Regulatory challenges

– Shanghai AJ 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 Recreational Products industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Shanghai AJ in Recreational Products industry. The Recreational Products 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.

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 Shanghai AJ in the Recreational Products sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Shanghai AJ 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.

Shortening product life cycle

– it is one of the major threat that Shanghai AJ is facing in Recreational Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Shanghai AJ.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Shanghai AJ 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 Shanghai AJ prominent markets.

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Weighted SWOT Analysis of Shanghai AJ Template, Example

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

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