Hangcha (603298) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hangcha (China)
Based on various researches at Oak Spring University , Hangcha is operating in a macro-environment that has been destablized by – technology disruption, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing commodity prices,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hangcha can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hangcha, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hangcha 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 Hangcha can be done for the following purposes –
1. Strategic planning of Hangcha
2. Improving business portfolio management of Hangcha
3. Assessing feasibility of the new initiative in China
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hangcha
Strengths of Hangcha | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hangcha are -
High switching costs
– The high switching costs that Hangcha 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.
Ability to recruit top talent
– Hangcha is one of the leading players in the Misc. Capital Goods 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.
Highly skilled collaborators
– Hangcha has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Capital Goods industry. Secondly the value chain collaborators of Hangcha have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Hangcha 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 Misc. Capital Goods 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.
High brand equity
– Hangcha has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hangcha to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Misc. Capital Goods industry
– Hangcha has clearly differentiated products in the market place. This has enabled Hangcha to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Hangcha to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Hangcha comprises – understanding the underlying the factors in the Misc. Capital Goods 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.
Low bargaining power of suppliers
– Suppliers of Hangcha in the Capital Goods sector have low bargaining power. Hangcha has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hangcha to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Hangcha 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.
Diverse revenue streams
– Hangcha is present in almost all the verticals within the Misc. Capital Goods industry. This has provided Hangcha 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.
Organizational Resilience of Hangcha
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hangcha does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Hangcha has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hangcha staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Hangcha | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hangcha are -
High dependence on Hangcha ‘s star products
– The top 2 products and services of Hangcha still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though Hangcha has relatively successful track record of launching new products.
Products dominated business model
– Even though Hangcha has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hangcha should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Misc. Capital Goods industry, Hangcha 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.
Lack of clear differentiation of Hangcha products
– To increase the profitability and margins on the products, Hangcha needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at Hangcha 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.
Slow to strategic competitive environment developments
– As Hangcha is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Hangcha, it seems that company is thinking out the frontier risks that can impact Misc. Capital Goods 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 cash cycle compare to competitors
Hangcha has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Hangcha 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 operating costs
– Compare to the competitors, Hangcha has high operating costs in the Misc. Capital Goods industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hangcha lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Hangcha has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Capital Goods industry over the last five years. Hangcha 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.
Hangcha Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hangcha are -
Leveraging digital technologies
– Hangcha 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.
Manufacturing automation
– Hangcha can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hangcha is facing challenges because of the dominance of functional experts in the organization. Hangcha can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hangcha 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 Hangcha to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Hangcha 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 Misc. Capital Goods industry.
Use of Bitcoin and other crypto currencies for transactions in Misc. Capital Goods industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hangcha in the Misc. Capital Goods industry. Now Hangcha can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Hangcha can develop new processes and procedures in Misc. Capital Goods 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 Hangcha in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Hangcha has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help Hangcha to build a more holistic ecosystem for Hangcha products in the Misc. Capital Goods 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, Hangcha 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hangcha can use these opportunities to build new business models that can help the communities that Hangcha operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. Hangcha can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Hangcha can improve the customer journey of consumers in the Misc. Capital Goods 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.
Threats Hangcha External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hangcha are -
Technology acceleration in Forth Industrial Revolution
– Hangcha has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Hangcha needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
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 Hangcha business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Hangcha 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 Misc. Capital Goods industry regulations.
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. Hangcha needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Increasing wage structure of Hangcha
– 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 Hangcha.
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 Hangcha.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hangcha may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Capital Goods sector.
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 Hangcha in the Misc. Capital Goods sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Hangcha is facing in Misc. Capital Goods 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.
Easy access to finance
– Easy access to finance in Misc. Capital Goods industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hangcha can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents Hangcha with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Capital Goods sector.
High dependence on third party suppliers
– Hangcha 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.
Weighted SWOT Analysis of Hangcha Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hangcha 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 Hangcha 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 Hangcha 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 Hangcha 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 Hangcha needs to make to build a sustainable competitive advantage.