Liugong A (528) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Liugong A (China)

Based on various researches at Oak Spring University , Liugong A is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of Liugong A

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

Strengths of Liugong A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Liugong A are -

High switching costs

– The high switching costs that Liugong A 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.

Learning organization

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

Low bargaining power of suppliers

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

Sustainable margins compare to other players in Constr. & Agric. Machinery industry

– Liugong A has clearly differentiated products in the market place. This has enabled Liugong A to fetch slight price premium compare to the competitors in the Constr. & Agric. Machinery industry. The sustainable margins have also helped Liugong A to invest into research and development (R&D) and innovation.

Successful track record of launching new products

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

– Liugong A 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 Constr. & Agric. Machinery 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.

Digital Transformation in Constr. & Agric. Machinery industry

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

Ability to lead change in Constr. & Agric. Machinery

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

Innovation driven organization

– Liugong A is one of the most innovative firm in Constr. & Agric. Machinery sector.

Diverse revenue streams

– Liugong A is present in almost all the verticals within the Constr. & Agric. Machinery industry. This has provided Liugong A 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.

Effective Research and Development (R&D)

– Liugong A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Liugong A staying ahead in the Constr. & Agric. Machinery industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Strong track record of project management in the Constr. & Agric. Machinery industry

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

Weaknesses of Liugong A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Liugong A are -

Products dominated business model

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

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

Aligning sales with marketing

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

High dependence on Liugong A ‘s star products

– The top 2 products and services of Liugong A still accounts for major business revenue. This dependence on star products in Constr. & Agric. Machinery industry has resulted into insufficient focus on developing new products, even though Liugong A has relatively successful track record of launching new products.

Compensation and incentives

– The revenue per employee of Liugong A is just above the Constr. & Agric. Machinery 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.

High operating costs

– Compare to the competitors, Liugong A has high operating costs in the Constr. & Agric. Machinery industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Liugong A lucrative customers.

Slow decision making process

– As mentioned earlier in the report, Liugong A has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. & Agric. Machinery industry over the last five years. Liugong A 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.

No frontier risks strategy

– From the 10K / annual statement of Liugong A, it seems that company is thinking out the frontier risks that can impact Constr. & Agric. Machinery 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, Liugong A 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.

Need for greater diversity

– Liugong A 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.

Capital Spending Reduction

– Even during the low interest decade, Liugong A has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Constr. & Agric. Machinery industry using digital technology.

Liugong A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Liugong A are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Constr. & Agric. Machinery industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Liugong A 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. Liugong A 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.

Learning at scale

– Online learning technologies has now opened space for Liugong A 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Liugong A in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. & Agric. Machinery industry, and it will provide faster access to the consumers.

Finding new ways to collaborate

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

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 Liugong A 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.

Creating value in data economy

– The success of analytics program of Liugong A has opened avenues for new revenue streams for the organization in Constr. & Agric. Machinery industry. This can help Liugong A to build a more holistic ecosystem for Liugong A products in the Constr. & Agric. Machinery industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Better consumer reach

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

Harnessing reconfiguration of the global supply chains

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Liugong A 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.

Leveraging digital technologies

– Liugong A 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.

Building a culture of innovation

– managers at Liugong A 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 Constr. & Agric. Machinery industry.

Reforming the budgeting process

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Liugong A can use these opportunities to build new business models that can help the communities that Liugong A operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.

Threats Liugong A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Liugong A are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Liugong A may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. & Agric. Machinery sector.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Liugong A needs to understand the core reasons impacting the Constr. & Agric. Machinery industry. This will help it in building a better workplace.

Easy access to finance

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

Environmental challenges

– Liugong A 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. Liugong A can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery industry.

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 Liugong A business can come under increasing regulations regarding data privacy, data security, etc.

Shortening product life cycle

– it is one of the major threat that Liugong A is facing in Constr. & Agric. Machinery sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Consumer confidence and its impact on Liugong A 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 Constr. & Agric. Machinery industry and other sectors.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Liugong A 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 Liugong A prominent markets.

Stagnating economy with rate increase

– Liugong A 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 Constr. & Agric. Machinery industry.

Increasing wage structure of Liugong A

– 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 Liugong A.

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 Liugong A.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Liugong A in Constr. & Agric. Machinery industry. The Constr. & Agric. Machinery 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Constr. & Agric. Machinery industry are lowering. It can presents Liugong A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. & Agric. Machinery sector.

Weighted SWOT Analysis of Liugong A Template, Example

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

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