Xianhe (603733) SWOT Analysis / TOWS Matrix / MBA Resources
Paper & Paper Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Xianhe (China)
Based on various researches at Oak Spring University , Xianhe is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, geopolitical disruptions, there is backlash against globalization,
wage bills are increasing, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Xianhe can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Xianhe, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Xianhe 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 Xianhe can be done for the following purposes –
1. Strategic planning of Xianhe
2. Improving business portfolio management of Xianhe
3. Assessing feasibility of the new initiative in China
4. Making a Paper & Paper Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Xianhe
Strengths of Xianhe | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Xianhe are -
Effective Research and Development (R&D)
– Xianhe has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Xianhe staying ahead in the Paper & Paper Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Xianhe 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.
Organizational Resilience of Xianhe
– The covid-19 pandemic has put organizational resilience at the centre of everthing Xianhe does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Xianhe 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.
Low bargaining power of suppliers
– Suppliers of Xianhe in the Basic Materials sector have low bargaining power. Xianhe has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Xianhe to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Xianhe 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.
Operational resilience
– The operational resilience strategy of Xianhe comprises – understanding the underlying the factors in the Paper & Paper Products 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.
High brand equity
– Xianhe has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Xianhe to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Xianhe is one of the most innovative firm in Paper & Paper Products sector.
Successful track record of launching new products
– Xianhe has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Xianhe 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.
Learning organization
- Xianhe 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 Xianhe is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Xianhe emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Xianhe is present in almost all the verticals within the Paper & Paper Products industry. This has provided Xianhe 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.
Weaknesses of Xianhe | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Xianhe are -
Skills based hiring in Paper & Paper Products industry
– The stress on hiring functional specialists at Xianhe 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.
Interest costs
– Compare to the competition, Xianhe 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 bargaining power of channel partners in Paper & Paper Products industry
– because of the regulatory requirements in China, Xianhe is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Paper & Paper Products industry.
Ability to respond to the competition
– As the decision making is very deliberative at Xianhe, in the dynamic environment of Paper & Paper Products industry it has struggled to respond to the nimble upstart competition. Xianhe has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Xianhe supply chain. Even after few cautionary changes, Xianhe is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Xianhe vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Xianhe products
– To increase the profitability and margins on the products, Xianhe needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Paper & Paper Products industry, Xianhe 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.
Employees’ less understanding of Xianhe strategy
– From the outside it seems that the employees of Xianhe 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.
Increasing silos among functional specialists
– The organizational structure of Xianhe is dominated by functional specialists. It is not different from other players in the Paper & Paper Products industry, but Xianhe needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Xianhe to focus more on services in the Paper & Paper Products industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Xianhe, it seems that company is thinking out the frontier risks that can impact Paper & Paper Products 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.
Slow decision making process
– As mentioned earlier in the report, Xianhe has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Paper & Paper Products industry over the last five years. Xianhe 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.
Xianhe Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Xianhe are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Xianhe 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.
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. Xianhe can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Xianhe is facing challenges because of the dominance of functional experts in the organization. Xianhe can utilize new technology in the field of Paper & Paper Products 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, Xianhe 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 Xianhe to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Xianhe can use the latest technology developments to improve its manufacturing and designing process in Paper & Paper Products 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.
Buying journey improvements
– Xianhe can improve the customer journey of consumers in the Paper & Paper Products industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Xianhe can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Xianhe 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.
Better consumer reach
– The expansion of the 5G network will help Xianhe to increase its market reach. Xianhe will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Paper & Paper Products industry, but it has also influenced the consumer preferences. Xianhe can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Paper & Paper Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Xianhe 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. Xianhe 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Xianhe can use these opportunities to build new business models that can help the communities that Xianhe operates in. Secondly it can use opportunities from government spending in Paper & Paper Products sector.
Building a culture of innovation
– managers at Xianhe 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 Paper & Paper Products industry.
Threats Xianhe External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Xianhe are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Paper & Paper Products industry are lowering. It can presents Xianhe with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Paper & Paper Products sector.
Consumer confidence and its impact on Xianhe 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 Paper & Paper Products industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Xianhe is facing in Paper & Paper Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Xianhe may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Paper & Paper Products sector.
Stagnating economy with rate increase
– Xianhe 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 Paper & Paper Products 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. Xianhe needs to understand the core reasons impacting the Paper & Paper Products industry. This will help it in building a better workplace.
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.
Regulatory challenges
– Xianhe 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 Paper & Paper Products industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Xianhe in Paper & Paper Products industry. The Paper & Paper Products industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Xianhe 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. Xianhe can take advantage of this fund but it will also bring new competitors in the Paper & Paper Products industry.
Easy access to finance
– Easy access to finance in Paper & Paper Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Xianhe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Xianhe 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 Xianhe prominent markets.
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 Xianhe in the Paper & Paper Products sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Xianhe Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Xianhe 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 Xianhe 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 Xianhe 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 Xianhe 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 Xianhe needs to make to build a sustainable competitive advantage.
