Hengdian Entertainment (603103) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hengdian Entertainment (China)

Based on various researches at Oak Spring University , Hengdian Entertainment is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing energy prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of Hengdian Entertainment

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

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Strengths of Hengdian Entertainment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hengdian Entertainment are -

High brand equity

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

Operational resilience

– The operational resilience strategy of Hengdian Entertainment comprises – understanding the underlying the factors in the Motion Pictures 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.

Effective Research and Development (R&D)

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

Ability to recruit top talent

– Hengdian Entertainment is one of the leading players in the Motion Pictures 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 Hengdian Entertainment in Motion Pictures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Hengdian Entertainment 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 Motion Pictures 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 Hengdian Entertainment 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.

Training and development

– Hengdian Entertainment has one of the best training and development program in Services 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.

Learning organization

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

Innovation driven organization

– Hengdian Entertainment is one of the most innovative firm in Motion Pictures sector.

Digital Transformation in Motion Pictures industry

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

Highly skilled collaborators

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

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Weaknesses of Hengdian Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hengdian Entertainment are -

Compensation and incentives

– The revenue per employee of Hengdian Entertainment is just above the Motion Pictures 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.

Slow decision making process

– As mentioned earlier in the report, Hengdian Entertainment has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Motion Pictures industry over the last five years. Hengdian Entertainment 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.

Employees’ less understanding of Hengdian Entertainment strategy

– From the outside it seems that the employees of Hengdian Entertainment 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.

Products dominated business model

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

Skills based hiring in Motion Pictures industry

– The stress on hiring functional specialists at Hengdian Entertainment 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 Hengdian Entertainment, it seems that company is thinking out the frontier risks that can impact Motion Pictures 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 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 Hengdian Entertainment supply chain. Even after few cautionary changes, Hengdian Entertainment is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hengdian Entertainment vulnerable to further global disruptions in South East Asia.

Aligning sales with marketing

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

High operating costs

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

Interest costs

– Compare to the competition, Hengdian Entertainment 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.

High cash cycle compare to competitors

Hengdian Entertainment has a high cash cycle compare to other players in the Motion Pictures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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Hengdian Entertainment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hengdian Entertainment are -

Increase in government spending

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

Finding new ways to collaborate

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

Learning at scale

– Online learning technologies has now opened space for Hengdian Entertainment 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.

Harnessing reconfiguration of the global supply chains

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

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. Hengdian Entertainment can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Motion Pictures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hengdian Entertainment 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. Hengdian Entertainment 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

– Hengdian Entertainment 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.

Creating value in data economy

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Hengdian Entertainment 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.

Developing new processes and practices

– Hengdian Entertainment can develop new processes and procedures in Motion Pictures 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.

Lowering marketing communication costs

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

Remote work and new talent hiring opportunities

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

Building a culture of innovation

– managers at Hengdian Entertainment 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 Motion Pictures industry.

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Threats Hengdian Entertainment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hengdian Entertainment are -

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 Hengdian Entertainment in the Motion Pictures sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Hengdian Entertainment 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Hengdian Entertainment 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 Hengdian Entertainment prominent markets.

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. Hengdian Entertainment needs to understand the core reasons impacting the Motion Pictures industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Hengdian Entertainment has witnessed rapid integration of technology during Covid-19 in the Motion Pictures industry. As one of the leading players in the industry, Hengdian Entertainment needs to keep up with the evolution of technology in the Motion Pictures 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.

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. Hengdian Entertainment 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.

Consumer confidence and its impact on Hengdian Entertainment 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 Motion Pictures industry and other sectors.

Stagnating economy with rate increase

– Hengdian Entertainment 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 Motion Pictures 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 Hengdian Entertainment.

Shortening product life cycle

– it is one of the major threat that Hengdian Entertainment is facing in Motion Pictures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Hengdian Entertainment business can come under increasing regulations regarding data privacy, data security, etc.

Learning curve for new practices

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

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Weighted SWOT Analysis of Hengdian Entertainment Template, Example

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

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