Huadian Heavy Industries (601226) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Huadian Heavy Industries (China)

Based on various researches at Oak Spring University , Huadian Heavy Industries is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , wage bills are increasing, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing transportation and logistics costs, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Huadian Heavy Industries

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Huadian Heavy Industries can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Huadian Heavy Industries, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Huadian Heavy Industries 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 Huadian Heavy Industries can be done for the following purposes –
1. Strategic planning of Huadian Heavy Industries
2. Improving business portfolio management of Huadian Heavy Industries
3. Assessing feasibility of the new initiative in China
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Huadian Heavy Industries

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Strengths of Huadian Heavy Industries | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Huadian Heavy Industries are -

Ability to recruit top talent

– Huadian Heavy Industries is one of the leading players in the Construction Services 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.

Effective Research and Development (R&D)

– Huadian Heavy Industries has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Huadian Heavy Industries staying ahead in the Construction Services 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 Huadian Heavy Industries comprises – understanding the underlying the factors in the Construction Services 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.

Strong track record of project management in the Construction Services industry

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

Low bargaining power of suppliers

– Suppliers of Huadian Heavy Industries in the Capital Goods sector have low bargaining power. Huadian Heavy Industries has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Huadian Heavy Industries to manage not only supply disruptions but also source products at highly competitive prices.

Organizational Resilience of Huadian Heavy Industries

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

Superior customer experience

– The customer experience strategy of Huadian Heavy Industries in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Huadian Heavy Industries 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 Construction Services 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.

Sustainable margins compare to other players in Construction Services industry

– Huadian Heavy Industries has clearly differentiated products in the market place. This has enabled Huadian Heavy Industries to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Huadian Heavy Industries to invest into research and development (R&D) and innovation.

High brand equity

– Huadian Heavy Industries has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Huadian Heavy Industries to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

High switching costs

– The high switching costs that Huadian Heavy Industries 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.

Successful track record of launching new products

– Huadian Heavy Industries has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Huadian Heavy Industries 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.

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Weaknesses of Huadian Heavy Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Huadian Heavy Industries are -

Products dominated business model

– Even though Huadian Heavy Industries has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Huadian Heavy Industries should strive to include more intangible value offerings along with its core products and services.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Huadian Heavy Industries 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.

Aligning sales with marketing

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

High operating costs

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

Ability to respond to the competition

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

Low market penetration in new markets

– Outside its home market of China, Huadian Heavy Industries needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Capital Spending Reduction

– Even during the low interest decade, Huadian Heavy Industries 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 Construction Services industry using digital technology.

High dependence on Huadian Heavy Industries ‘s star products

– The top 2 products and services of Huadian Heavy Industries still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Huadian Heavy Industries has relatively successful track record of launching new products.

Interest costs

– Compare to the competition, Huadian Heavy Industries 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 to strategic competitive environment developments

– As Huadian Heavy Industries is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.

Slow decision making process

– As mentioned earlier in the report, Huadian Heavy Industries has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Huadian Heavy Industries 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.

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Huadian Heavy Industries Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Huadian Heavy Industries are -

Loyalty marketing

– Huadian Heavy Industries 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.

Redefining models of collaboration and team work

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Huadian Heavy Industries 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.

Use of Bitcoin and other crypto currencies for transactions in Construction Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Huadian Heavy Industries in the Construction Services industry. Now Huadian Heavy Industries can target international markets with far fewer capital restrictions requirements than the existing system.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Huadian Heavy Industries 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 Huadian Heavy Industries 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 Huadian Heavy Industries 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Huadian Heavy Industries can use these opportunities to build new business models that can help the communities that Huadian Heavy Industries operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Better consumer reach

– The expansion of the 5G network will help Huadian Heavy Industries to increase its market reach. Huadian Heavy Industries 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.

Using analytics as competitive advantage

– Huadian Heavy Industries has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Huadian Heavy Industries to build a competitive advantage using analytics. The analytics driven competitive advantage can help Huadian Heavy Industries to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– Huadian Heavy Industries can use the latest technology developments to improve its manufacturing and designing process in Construction Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Buying journey improvements

– Huadian Heavy Industries can improve the customer journey of consumers in the Construction Services 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Huadian Heavy Industries in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.

Leveraging digital technologies

– Huadian Heavy Industries 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.

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Threats Huadian Heavy Industries External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Huadian Heavy Industries are -

Consumer confidence and its impact on Huadian Heavy Industries 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 Construction Services industry and other sectors.

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 Huadian Heavy Industries.

Stagnating economy with rate increase

– Huadian Heavy Industries 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 Construction Services 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. Huadian Heavy Industries 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.

Environmental challenges

– Huadian Heavy Industries 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. Huadian Heavy Industries can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Huadian Heavy Industries in Construction Services industry. The Construction Services 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.

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.

Increasing wage structure of Huadian Heavy Industries

– 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 Huadian Heavy Industries.

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. Huadian Heavy Industries needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.

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 Huadian Heavy Industries 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 Huadian Heavy Industries in the Construction Services sector and impact the bottomline of the organization.

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.

High dependence on third party suppliers

– Huadian Heavy Industries 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.

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Weighted SWOT Analysis of Huadian Heavy Industries Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Huadian Heavy Industries 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 Huadian Heavy Industries 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 Huadian Heavy Industries 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 Huadian Heavy Industries 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 Huadian Heavy Industries needs to make to build a sustainable competitive advantage.

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