Xiangtan Electric (600416) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Xiangtan Electric (China)
Based on various researches at Oak Spring University , Xiangtan Electric is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Xiangtan Electric
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Xiangtan Electric can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Xiangtan Electric, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Xiangtan Electric 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 Xiangtan Electric can be done for the following purposes –
1. Strategic planning of Xiangtan Electric
2. Improving business portfolio management of Xiangtan Electric
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 Xiangtan Electric
Strengths of Xiangtan Electric | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Xiangtan Electric are -
High switching costs
– The high switching costs that Xiangtan Electric 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.
Analytics focus
– Xiangtan Electric 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.
Effective Research and Development (R&D)
– Xiangtan Electric has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Xiangtan Electric 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.
Operational resilience
– The operational resilience strategy of Xiangtan Electric 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.
Highly skilled collaborators
– Xiangtan Electric 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 Xiangtan Electric have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Misc. Capital Goods
– Xiangtan Electric is one of the leading players in the Misc. Capital Goods industry in China. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in China but also across the existing markets. The ability to lead change has enabled Xiangtan Electric in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Xiangtan Electric
– The covid-19 pandemic has put organizational resilience at the centre of everthing Xiangtan Electric does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Xiangtan Electric is present in almost all the verticals within the Misc. Capital Goods industry. This has provided Xiangtan Electric 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
– Xiangtan Electric 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.
Low bargaining power of suppliers
– Suppliers of Xiangtan Electric in the Capital Goods sector have low bargaining power. Xiangtan Electric has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Xiangtan Electric to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Xiangtan Electric in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Xiangtan Electric 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 Xiangtan Electric is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Xiangtan Electric emphasize – knowledge, initiative, and innovation.
Weaknesses of Xiangtan Electric | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Xiangtan Electric are -
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at Xiangtan Electric 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.
Ability to respond to the competition
– As the decision making is very deliberative at Xiangtan Electric, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. Xiangtan Electric has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Xiangtan Electric 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.
Slow to strategic competitive environment developments
– As Xiangtan Electric 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.
Products dominated business model
– Even though Xiangtan Electric 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. Xiangtan Electric should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Xiangtan Electric 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.
Slow decision making process
– As mentioned earlier in the report, Xiangtan Electric 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. Xiangtan Electric 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.
Compensation and incentives
– The revenue per employee of Xiangtan Electric is just above the Misc. Capital Goods 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 bargaining power of channel partners in Misc. Capital Goods industry
– because of the regulatory requirements in China, Xiangtan Electric 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 Misc. Capital Goods industry.
Low market penetration in new markets
– Outside its home market of China, Xiangtan Electric needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Xiangtan Electric ‘s star products
– The top 2 products and services of Xiangtan Electric 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 Xiangtan Electric has relatively successful track record of launching new products.
Xiangtan Electric Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Xiangtan Electric are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Xiangtan Electric 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.
Building a culture of innovation
– managers at Xiangtan Electric 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.
Learning at scale
– Online learning technologies has now opened space for Xiangtan Electric 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Xiangtan Electric 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 Xiangtan Electric to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Xiangtan Electric can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Xiangtan Electric 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.
Using analytics as competitive advantage
– Xiangtan Electric has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Capital Goods sector. This continuous investment in analytics has enabled Xiangtan Electric to build a competitive advantage using analytics. The analytics driven competitive advantage can help Xiangtan Electric to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Xiangtan Electric 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
– Xiangtan Electric 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.
Buying journey improvements
– Xiangtan Electric 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.
Developing new processes and practices
– Xiangtan Electric 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 Xiangtan Electric 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.
Leveraging digital technologies
– Xiangtan Electric 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.
Threats Xiangtan Electric External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Xiangtan Electric are -
Increasing wage structure of Xiangtan Electric
– 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 Xiangtan Electric.
Consumer confidence and its impact on Xiangtan Electric 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 Misc. Capital Goods industry and other sectors.
High dependence on third party suppliers
– Xiangtan Electric 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.
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. Xiangtan Electric can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Xiangtan Electric 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.
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.
Shortening product life cycle
– it is one of the major threat that Xiangtan Electric is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents Xiangtan Electric 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Xiangtan Electric in Misc. Capital Goods industry. The Misc. Capital Goods 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Xiangtan Electric 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 Xiangtan Electric prominent markets.
Technology acceleration in Forth Industrial Revolution
– Xiangtan Electric has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Xiangtan Electric 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.
Regulatory challenges
– Xiangtan Electric 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.
Stagnating economy with rate increase
– Xiangtan Electric 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 Misc. Capital Goods industry.
Weighted SWOT Analysis of Xiangtan Electric Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Xiangtan Electric 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 Xiangtan Electric 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 Xiangtan Electric 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 Xiangtan Electric 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 Xiangtan Electric needs to make to build a sustainable competitive advantage.
