China Auto Engineering (601965) SWOT Analysis / TOWS Matrix / MBA Resources
Business Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Auto Engineering (China)
Based on various researches at Oak Spring University , China Auto Engineering is operating in a macro-environment that has been destablized by – increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, geopolitical disruptions,
talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of China Auto Engineering
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Auto Engineering can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Auto Engineering, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Auto Engineering 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 China Auto Engineering can be done for the following purposes –
1. Strategic planning of China Auto Engineering
2. Improving business portfolio management of China Auto Engineering
3. Assessing feasibility of the new initiative in China
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of China Auto Engineering
Strengths of China Auto Engineering | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Auto Engineering are -
Low bargaining power of suppliers
– Suppliers of China Auto Engineering in the Services sector have low bargaining power. China Auto Engineering has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Auto Engineering to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Business Services industry
– China Auto Engineering has clearly differentiated products in the market place. This has enabled China Auto Engineering to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped China Auto Engineering to invest into research and development (R&D) and innovation.
Digital Transformation in Business Services industry
- digital transformation varies from industry to industry. For China Auto Engineering digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Auto Engineering 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.
High brand equity
– China Auto Engineering has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Auto Engineering to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- China Auto Engineering 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 China Auto Engineering is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Auto Engineering emphasize – knowledge, initiative, and innovation.
Analytics focus
– China Auto Engineering 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 Business Services 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.
Ability to lead change in Business Services
– China Auto Engineering is one of the leading players in the Business Services industry in China. Over the years it has not only transformed the business landscape in the Business Services industry in China but also across the existing markets. The ability to lead change has enabled China Auto Engineering in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of China Auto Engineering comprises – understanding the underlying the factors in the Business Services 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.
Innovation driven organization
– China Auto Engineering is one of the most innovative firm in Business Services sector.
Superior customer experience
– The customer experience strategy of China Auto Engineering in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– China Auto Engineering is one of the leading players in the Business Services 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.
Effective Research and Development (R&D)
– China Auto Engineering has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Auto Engineering staying ahead in the Business Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of China Auto Engineering | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Auto Engineering are -
No frontier risks strategy
– From the 10K / annual statement of China Auto Engineering, it seems that company is thinking out the frontier risks that can impact Business Services 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.
Capital Spending Reduction
– Even during the low interest decade, China Auto Engineering 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 Business Services industry using digital technology.
Skills based hiring in Business Services industry
– The stress on hiring functional specialists at China Auto Engineering 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.
High operating costs
– Compare to the competitors, China Auto Engineering has high operating costs in the Business Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract China Auto Engineering lucrative customers.
Increasing silos among functional specialists
– The organizational structure of China Auto Engineering is dominated by functional specialists. It is not different from other players in the Business Services industry, but China Auto Engineering needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Auto Engineering to focus more on services in the Business Services industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, China Auto Engineering has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Business Services industry over the last five years. China Auto Engineering 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.
Products dominated business model
– Even though China Auto Engineering has some of the most successful models in the Business Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Auto Engineering should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of China, China Auto Engineering needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Business Services industry, China Auto Engineering 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 dependence on China Auto Engineering ‘s star products
– The top 2 products and services of China Auto Engineering still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though China Auto Engineering has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, China Auto Engineering 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.
China Auto Engineering Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Auto Engineering are -
Learning at scale
– Online learning technologies has now opened space for China Auto Engineering 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 China Auto Engineering in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Auto Engineering 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 China Auto Engineering 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, China Auto Engineering 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Business Services industry, but it has also influenced the consumer preferences. China Auto Engineering can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Business Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for China Auto Engineering in the Business Services industry. Now China Auto Engineering can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– China Auto Engineering has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Business Services sector. This continuous investment in analytics has enabled China Auto Engineering to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Auto Engineering to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China Auto Engineering can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– China Auto Engineering can develop new processes and procedures in Business Services 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.
Manufacturing automation
– China Auto Engineering can use the latest technology developments to improve its manufacturing and designing process in Business Services 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.
Loyalty marketing
– China Auto Engineering 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Auto Engineering 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 China Auto Engineering to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help China Auto Engineering to increase its market reach. China Auto Engineering 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.
Threats China Auto Engineering External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Auto Engineering are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Auto Engineering may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Business Services sector.
Consumer confidence and its impact on China Auto Engineering 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 Business Services industry and other sectors.
Environmental challenges
– China Auto Engineering 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. China Auto Engineering can take advantage of this fund but it will also bring new competitors in the Business Services 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 China Auto Engineering.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents China Auto Engineering with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.
Regulatory challenges
– China Auto Engineering 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 Business Services industry regulations.
Increasing wage structure of China Auto Engineering
– 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 China Auto Engineering.
Technology acceleration in Forth Industrial Revolution
– China Auto Engineering has witnessed rapid integration of technology during Covid-19 in the Business Services industry. As one of the leading players in the industry, China Auto Engineering needs to keep up with the evolution of technology in the Business Services 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.
High dependence on third party suppliers
– China Auto Engineering 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.
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 China Auto Engineering business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that China Auto Engineering is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for China Auto Engineering in Business Services industry. The Business Services 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of China Auto Engineering Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Auto Engineering 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 China Auto Engineering 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 China Auto Engineering 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 China Auto Engineering 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 China Auto Engineering needs to make to build a sustainable competitive advantage.