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 – wage bills are increasing, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing energy prices, there is backlash against globalization, supply chains are disrupted by pandemic , 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 -

Organizational Resilience of Hengdian Entertainment

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

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.

Sustainable margins compare to other players in Motion Pictures industry

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

Diverse revenue streams

– Hengdian Entertainment is present in almost all the verticals within the Motion Pictures industry. This has provided Hengdian Entertainment 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.

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.

Low bargaining power of suppliers

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

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.

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.

Strong track record of project management in the Motion Pictures industry

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

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.

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.

Successful track record of launching new products

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

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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 -

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.

Capital Spending Reduction

– Even during the low interest decade, Hengdian Entertainment 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 Motion Pictures industry using digital technology.

Lack of clear differentiation of Hengdian Entertainment products

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

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.

Ability to respond to the competition

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

Slow to strategic competitive environment developments

– As Hengdian Entertainment is one of the leading players in the Motion Pictures industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Motion Pictures industry in last five years.

Slow to harness new channels of communication

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

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.

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.

Workers concerns about automation

– As automation is fast increasing in the Motion Pictures industry, Hengdian Entertainment needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

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.

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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 -

Redefining models of collaboration and team work

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

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.

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.

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.

Manufacturing automation

– Hengdian Entertainment can use the latest technology developments to improve its manufacturing and designing process in Motion Pictures 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.

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.

Use of Bitcoin and other crypto currencies for transactions in Motion Pictures industry

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

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.

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 Hengdian Entertainment 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.

Reforming the budgeting process

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

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.

Using analytics as competitive advantage

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

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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 -

Barriers of entry lowering

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Hengdian Entertainment in Motion Pictures industry. The Motion Pictures 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.

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.

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.

Regulatory challenges

– Hengdian Entertainment 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 Motion Pictures industry regulations.

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.

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.

Environmental challenges

– Hengdian Entertainment 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. Hengdian Entertainment can take advantage of this fund but it will also bring new competitors in the Motion Pictures industry.

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.

Easy access to finance

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

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.

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.

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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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