Hongxing Iron & Steel (600307) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hongxing Iron & Steel (China)
Based on various researches at Oak Spring University , Hongxing Iron & Steel is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, geopolitical disruptions, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing commodity prices, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Hongxing Iron & Steel
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hongxing Iron & Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hongxing Iron & Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hongxing 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 Hongxing Iron & Steel can be done for the following purposes –
1. Strategic planning of Hongxing Iron & Steel
2. Improving business portfolio management of Hongxing 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 Hongxing Iron & Steel
Strengths of Hongxing Iron & Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hongxing Iron & Steel are -
Training and development
– Hongxing Iron & Steel has one of the best training and development program in Basic Materials 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 switching costs
– The high switching costs that Hongxing 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.
Diverse revenue streams
– Hongxing Iron & Steel is present in almost all the verticals within the Iron & Steel industry. This has provided Hongxing 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.
Sustainable margins compare to other players in Iron & Steel industry
– Hongxing Iron & Steel has clearly differentiated products in the market place. This has enabled Hongxing Iron & Steel to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Hongxing Iron & Steel to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Hongxing Iron & Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hongxing Iron & Steel staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Hongxing Iron & Steel in the Basic Materials sector have low bargaining power. Hongxing Iron & Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hongxing Iron & Steel to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Hongxing Iron & Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Hongxing Iron & Steel comprises – understanding the underlying the factors in the Iron & Steel 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.
Ability to recruit top talent
– Hongxing Iron & Steel is one of the leading players in the Iron & Steel 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.
Successful track record of launching new products
– Hongxing Iron & Steel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hongxing Iron & Steel 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.
Analytics focus
– Hongxing 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.
Highly skilled collaborators
– Hongxing Iron & Steel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Hongxing Iron & Steel have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Hongxing Iron & Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hongxing Iron & Steel are -
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 Hongxing Iron & Steel supply chain. Even after few cautionary changes, Hongxing Iron & Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hongxing Iron & Steel vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Hongxing Iron & Steel has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Hongxing Iron & Steel 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.
Increasing silos among functional specialists
– The organizational structure of Hongxing Iron & Steel is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Hongxing Iron & Steel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hongxing Iron & Steel to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Hongxing Iron & Steel 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.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Hongxing Iron & Steel 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.
No frontier risks strategy
– From the 10K / annual statement of Hongxing Iron & Steel, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.
High dependence on Hongxing Iron & Steel ‘s star products
– The top 2 products and services of Hongxing 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 Hongxing Iron & Steel has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Hongxing 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.
Products dominated business model
– Even though Hongxing Iron & Steel has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hongxing Iron & Steel should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hongxing Iron & Steel is slow explore the new channels of communication. These new channels of communication can help Hongxing 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.
Low market penetration in new markets
– Outside its home market of China, Hongxing Iron & Steel needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Hongxing Iron & Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hongxing Iron & Steel are -
Building a culture of innovation
– managers at Hongxing Iron & Steel can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Iron & Steel industry.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hongxing Iron & Steel can use these opportunities to build new business models that can help the communities that Hongxing Iron & Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hongxing 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hongxing Iron & Steel 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. Hongxing Iron & Steel 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.
Loyalty marketing
– Hongxing Iron & Steel 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hongxing Iron & Steel is facing challenges because of the dominance of functional experts in the organization. Hongxing 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hongxing 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 Hongxing 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.
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 Hongxing Iron & Steel in the Iron & Steel industry. Now Hongxing Iron & Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Hongxing Iron & Steel can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.
Developing new processes and practices
– Hongxing Iron & Steel can develop new processes and procedures in Iron & Steel industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hongxing 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.
Buying journey improvements
– Hongxing 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.
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. Hongxing 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.
Threats Hongxing Iron & Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hongxing Iron & Steel are -
Technology acceleration in Forth Industrial Revolution
– Hongxing Iron & Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Hongxing Iron & Steel needs to keep up with the evolution of technology in the Iron & Steel 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.
Consumer confidence and its impact on Hongxing 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.
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 Hongxing Iron & Steel in the Iron & Steel sector and impact the bottomline of the organization.
Increasing wage structure of Hongxing Iron & Steel
– 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 Hongxing Iron & Steel.
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.
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.
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 Hongxing Iron & Steel 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 Iron & Steel industry are lowering. It can presents Hongxing 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 Hongxing 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.
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. Hongxing 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hongxing Iron & Steel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
Environmental challenges
– Hongxing 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. Hongxing Iron & Steel can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
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 Hongxing Iron & Steel.
Weighted SWOT Analysis of Hongxing Iron & Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hongxing 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 Hongxing 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 Hongxing 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 Hongxing 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 Hongxing Iron & Steel needs to make to build a sustainable competitive advantage.