Hongda (600331) SWOT Analysis / TOWS Matrix / MBA Resources
Metal Mining
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hongda (China)
Based on various researches at Oak Spring University , Hongda is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, wage bills are increasing, technology disruption, increasing household debt because of falling income levels, central banks are concerned over increasing inflation,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hongda can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hongda, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hongda 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 Hongda can be done for the following purposes –
1. Strategic planning of Hongda
2. Improving business portfolio management of Hongda
3. Assessing feasibility of the new initiative in China
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hongda
Strengths of Hongda | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hongda are -
Sustainable margins compare to other players in Metal Mining industry
– Hongda has clearly differentiated products in the market place. This has enabled Hongda to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Hongda to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Hongda comprises – understanding the underlying the factors in the Metal Mining 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.
Ability to recruit top talent
– Hongda is one of the leading players in the Metal Mining 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.
Digital Transformation in Metal Mining industry
- digital transformation varies from industry to industry. For Hongda digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hongda 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.
Cross disciplinary teams
– Horizontal connected teams at the Hongda 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
– Hongda has one of the best training and development program in Basic Materials 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.
Low bargaining power of suppliers
– Suppliers of Hongda in the Basic Materials sector have low bargaining power. Hongda has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hongda to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Metal Mining industry
– Hongda is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Hongda in Metal Mining industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Hongda is present in almost all the verticals within the Metal Mining industry. This has provided Hongda 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.
Effective Research and Development (R&D)
– Hongda has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hongda staying ahead in the Metal Mining industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Hongda has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hongda to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Hongda | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hongda are -
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 Hongda supply chain. Even after few cautionary changes, Hongda is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hongda vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Hongda has some of the most successful models in the Metal Mining industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hongda should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Metal Mining industry
– The stress on hiring functional specialists at Hongda 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 Hongda, in the dynamic environment of Metal Mining industry it has struggled to respond to the nimble upstart competition. Hongda 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
Hongda has a high cash cycle compare to other players in the Metal Mining industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Hongda 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 Metal Mining industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Hongda is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but Hongda needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hongda to focus more on services in the Metal Mining industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Hongda, it seems that company is thinking out the frontier risks that can impact Metal Mining 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 Metal Mining industry
– because of the regulatory requirements in China, Hongda 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 Metal Mining industry.
Slow to strategic competitive environment developments
– As Hongda is one of the leading players in the Metal Mining industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Metal Mining industry in last five years.
Employees’ less understanding of Hongda strategy
– From the outside it seems that the employees of Hongda 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.
Hongda Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hongda are -
Building a culture of innovation
– managers at Hongda 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 Metal Mining industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Metal Mining industry, but it has also influenced the consumer preferences. Hongda 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 Metal Mining industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hongda in the Metal Mining industry. Now Hongda can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hongda can use these opportunities to build new business models that can help the communities that Hongda operates in. Secondly it can use opportunities from government spending in Metal Mining sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hongda 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 Hongda to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Hongda 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.
Buying journey improvements
– Hongda can improve the customer journey of consumers in the Metal Mining 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hongda 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 Hongda to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Hongda has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Metal Mining sector. This continuous investment in analytics has enabled Hongda to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hongda 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 Hongda can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hongda in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Metal Mining industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Hongda has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Hongda to build a more holistic ecosystem for Hongda products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Hongda can develop new processes and procedures in Metal Mining 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.
Threats Hongda External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hongda are -
Consumer confidence and its impact on Hongda 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 Metal Mining industry and other sectors.
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 Hongda business can come under increasing regulations regarding data privacy, data security, etc.
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 Hongda in the Metal Mining sector and impact the bottomline of the organization.
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 Hongda.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Metal Mining industry are lowering. It can presents Hongda with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Metal Mining sector.
Environmental challenges
– Hongda 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. Hongda can take advantage of this fund but it will also bring new competitors in the Metal Mining industry.
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. Hongda 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.
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. Hongda needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Metal Mining industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hongda can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hongda in Metal Mining industry. The Metal Mining 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.
Shortening product life cycle
– it is one of the major threat that Hongda is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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 Hongda Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hongda 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 Hongda 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 Hongda 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 Hongda 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 Hongda needs to make to build a sustainable competitive advantage.