China Auto Engineering (601965) SWOT Analysis / TOWS Matrix / 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 – challanges to central banks by blockchain based private currencies, geopolitical disruptions, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, there is backlash against globalization, central banks are concerned over increasing inflation, etc

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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.

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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

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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 -

Strong track record of project management in the Business Services industry

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

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.

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.

Innovation driven organization

– China Auto Engineering is one of the most innovative firm in Business Services sector.

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.

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.

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.

Highly skilled collaborators

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

Diverse revenue streams

– China Auto Engineering is present in almost all the verticals within the Business Services industry. This has provided China Auto Engineering 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.

High switching costs

– The high switching costs that China Auto Engineering 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.

Organizational Resilience of China Auto Engineering

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

Cross disciplinary teams

– Horizontal connected teams at the China Auto Engineering 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.

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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 -

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.

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.

High bargaining power of channel partners in Business Services industry

– because of the regulatory requirements in China, China Auto Engineering 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 Business Services industry.

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.

Slow to harness new channels of communication

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

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.

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.

Compensation and incentives

– The revenue per employee of China Auto Engineering is just above the Business Services 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.

High cash cycle compare to competitors

China Auto Engineering has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Ability to respond to the competition

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

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.

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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 -

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.

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.

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.

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 China Auto Engineering 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.

Leveraging digital technologies

– China Auto Engineering 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.

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.

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. China Auto Engineering 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 Business Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Auto Engineering 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. China Auto Engineering 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.

Creating value in data economy

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

Redefining models of collaboration and team work

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

Building a culture of innovation

– managers at China Auto Engineering 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 Business Services industry.

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.

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.

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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 -

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.

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.

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.

Easy access to finance

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

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 China Auto Engineering in the Business Services sector and impact the bottomline of the organization.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, China Auto Engineering 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 China Auto Engineering prominent markets.

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.

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. China Auto Engineering needs to understand the core reasons impacting the Business Services industry. This will help it in building a better workplace.

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.

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.

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.

Stagnating economy with rate increase

– China Auto Engineering 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 Business Services industry.

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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.

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