Arcplus Group (600629) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. - Supplies & Fixtures
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Arcplus Group (China)
Based on various researches at Oak Spring University , Arcplus Group is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing energy prices, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion,
increasing inequality as vast percentage of new income is going to the top 1%, 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 Arcplus Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arcplus Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arcplus Group 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 Arcplus Group can be done for the following purposes –
1. Strategic planning of Arcplus Group
2. Improving business portfolio management of Arcplus Group
3. Assessing feasibility of the new initiative in China
4. Making a Constr. - Supplies & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arcplus Group
Strengths of Arcplus Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arcplus Group are -
Superior customer experience
– The customer experience strategy of Arcplus Group in Constr. - Supplies & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Arcplus Group has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arcplus Group 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.
Innovation driven organization
– Arcplus Group is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
Organizational Resilience of Arcplus Group
– The covid-19 pandemic has put organizational resilience at the centre of everthing Arcplus Group 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 Arcplus Group 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.
Training and development
– Arcplus Group has one of the best training and development program in Capital Goods 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.
Ability to lead change in Constr. - Supplies & Fixtures
– Arcplus Group is one of the leading players in the Constr. - Supplies & Fixtures industry in China. Over the years it has not only transformed the business landscape in the Constr. - Supplies & Fixtures industry in China but also across the existing markets. The ability to lead change has enabled Arcplus Group in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Arcplus Group 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 Arcplus Group is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Arcplus Group emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Arcplus Group has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Arcplus Group staying ahead in the Constr. - Supplies & Fixtures industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Constr. - Supplies & Fixtures industry
– Arcplus Group has clearly differentiated products in the market place. This has enabled Arcplus Group to fetch slight price premium compare to the competitors in the Constr. - Supplies & Fixtures industry. The sustainable margins have also helped Arcplus Group to invest into research and development (R&D) and innovation.
Analytics focus
– Arcplus Group 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 Constr. - Supplies & Fixtures 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.
Highly skilled collaborators
– Arcplus Group has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. - Supplies & Fixtures industry. Secondly the value chain collaborators of Arcplus Group have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Arcplus Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arcplus Group are -
Compensation and incentives
– The revenue per employee of Arcplus Group is just above the Constr. - Supplies & Fixtures 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.
Products dominated business model
– Even though Arcplus Group has some of the most successful models in the Constr. - Supplies & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Arcplus Group 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, Arcplus Group needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Arcplus Group strategy
– From the outside it seems that the employees of Arcplus Group 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.
High cash cycle compare to competitors
Arcplus Group has a high cash cycle compare to other players in the Constr. - Supplies & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners in Constr. - Supplies & Fixtures industry
– because of the regulatory requirements in China, Arcplus Group 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 Constr. - Supplies & Fixtures industry.
Slow decision making process
– As mentioned earlier in the report, Arcplus Group has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. - Supplies & Fixtures industry over the last five years. Arcplus Group 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.
High dependence on Arcplus Group ‘s star products
– The top 2 products and services of Arcplus Group still accounts for major business revenue. This dependence on star products in Constr. - Supplies & Fixtures industry has resulted into insufficient focus on developing new products, even though Arcplus Group has relatively successful track record of launching new products.
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 Arcplus Group supply chain. Even after few cautionary changes, Arcplus Group is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arcplus Group vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Arcplus Group products
– To increase the profitability and margins on the products, Arcplus Group needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at Arcplus Group, in the dynamic environment of Constr. - Supplies & Fixtures industry it has struggled to respond to the nimble upstart competition. Arcplus Group has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Arcplus Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arcplus Group are -
Creating value in data economy
– The success of analytics program of Arcplus Group has opened avenues for new revenue streams for the organization in Constr. - Supplies & Fixtures industry. This can help Arcplus Group to build a more holistic ecosystem for Arcplus Group products in the Constr. - Supplies & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. - Supplies & Fixtures industry, but it has also influenced the consumer preferences. Arcplus Group can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arcplus Group can use these opportunities to build new business models that can help the communities that Arcplus Group operates in. Secondly it can use opportunities from government spending in Constr. - Supplies & Fixtures sector.
Buying journey improvements
– Arcplus Group can improve the customer journey of consumers in the Constr. - Supplies & Fixtures 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arcplus Group is facing challenges because of the dominance of functional experts in the organization. Arcplus Group can utilize new technology in the field of Constr. - Supplies & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Arcplus Group 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.
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. Arcplus Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Arcplus Group 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.
Better consumer reach
– The expansion of the 5G network will help Arcplus Group to increase its market reach. Arcplus Group 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arcplus Group 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 Arcplus Group 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 Constr. - Supplies & Fixtures industry.
Using analytics as competitive advantage
– Arcplus Group has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. - Supplies & Fixtures sector. This continuous investment in analytics has enabled Arcplus Group to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arcplus Group to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Arcplus Group 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.
Threats Arcplus Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arcplus Group are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arcplus Group 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 Arcplus Group prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arcplus Group in Constr. - Supplies & Fixtures industry. The Constr. - Supplies & Fixtures 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.
Easy access to finance
– Easy access to finance in Constr. - Supplies & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arcplus Group can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Arcplus Group 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.
Stagnating economy with rate increase
– Arcplus Group 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 Constr. - Supplies & Fixtures industry.
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.
Shortening product life cycle
– it is one of the major threat that Arcplus Group is facing in Constr. - Supplies & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Arcplus Group has witnessed rapid integration of technology during Covid-19 in the Constr. - Supplies & Fixtures industry. As one of the leading players in the industry, Arcplus Group needs to keep up with the evolution of technology in the Constr. - Supplies & Fixtures 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.
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 Arcplus Group.
Increasing wage structure of Arcplus Group
– 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 Arcplus Group.
Regulatory challenges
– Arcplus Group 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 Constr. - Supplies & Fixtures industry regulations.
Consumer confidence and its impact on Arcplus Group 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 Constr. - Supplies & Fixtures industry and other sectors.
Environmental challenges
– Arcplus Group 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. Arcplus Group can take advantage of this fund but it will also bring new competitors in the Constr. - Supplies & Fixtures industry.
Weighted SWOT Analysis of Arcplus Group Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arcplus Group 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 Arcplus Group 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 Arcplus Group 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 Arcplus Group 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 Arcplus Group needs to make to build a sustainable competitive advantage.