Hongda (600331) SWOT Analysis / TOWS Matrix / 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 – increasing transportation and logistics costs, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Hongda

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.

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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

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Strengths of Hongda | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hongda are -

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.

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.

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.

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.

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.

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.

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.

Learning organization

- Hongda 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 Hongda is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hongda emphasize – knowledge, initiative, and innovation.

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.

High switching costs

– The high switching costs that Hongda 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.

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Weaknesses of Hongda | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hongda are -

Aligning sales with marketing

– From the outside it seems that Hongda needs to have more collaboration between its sales team and marketing team. Sales professionals in the Metal Mining industry have deep experience in developing customer relationships. Marketing department at Hongda can leverage the sales team experience to cultivate customer relationships as Hongda is planning to shift buying processes online.

Slow to harness new channels of communication

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

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 decision making process

– As mentioned earlier in the report, Hongda has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Metal Mining industry over the last five years. Hongda 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.

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.

Lack of clear differentiation of Hongda products

– To increase the profitability and margins on the products, Hongda needs to provide more differentiated products than what it is currently offering in the marketplace.

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.

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.

Interest costs

– Compare to the competition, Hongda 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.

High operating costs

– Compare to the competitors, Hongda has high operating costs in the Metal Mining industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hongda lucrative customers.

Workers concerns about automation

– As automation is fast increasing in the Metal Mining industry, Hongda 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.

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Hongda Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hongda are -

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. Hongda can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Hongda 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.

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.

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.

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.

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.

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.

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.

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.

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.

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Threats Hongda External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hongda are -

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Hongda may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Metal Mining sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Hongda 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 Hongda prominent markets.

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.

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.

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.

Increasing wage structure of Hongda

– 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 Hongda.

Stagnating economy with rate increase

– Hongda 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 Metal Mining industry.

Technology acceleration in Forth Industrial Revolution

– Hongda has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Hongda needs to keep up with the evolution of technology in the Metal Mining 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.

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.

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.

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.

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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.

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