SWOT Analysis / TOWS Matrix for Sichuan Chengfa Aero (China)
Based on various researches at Oak Spring University , Sichuan Chengfa Aero is operating in a macro-environment that has been destablized by – technology disruption, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, increasing commodity prices, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%,
cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Sichuan Chengfa Aero
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sichuan Chengfa Aero can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sichuan Chengfa Aero, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sichuan Chengfa Aero 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 Sichuan Chengfa Aero can be done for the following purposes –
1. Strategic planning of Sichuan Chengfa Aero
2. Improving business portfolio management of Sichuan Chengfa Aero
3. Assessing feasibility of the new initiative in China
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sichuan Chengfa Aero
Strengths of Sichuan Chengfa Aero | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sichuan Chengfa Aero are -
Ability to recruit top talent
– Sichuan Chengfa Aero is one of the leading players in the Aerospace & Defense 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.
Sustainable margins compare to other players in Aerospace & Defense industry
– Sichuan Chengfa Aero has clearly differentiated products in the market place. This has enabled Sichuan Chengfa Aero to fetch slight price premium compare to the competitors in the Aerospace & Defense industry. The sustainable margins have also helped Sichuan Chengfa Aero to invest into research and development (R&D) and innovation.
Training and development
– Sichuan Chengfa Aero 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.
Highly skilled collaborators
– Sichuan Chengfa Aero has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Sichuan Chengfa Aero have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Sichuan Chengfa Aero in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Sichuan Chengfa Aero is present in almost all the verticals within the Aerospace & Defense industry. This has provided Sichuan Chengfa Aero 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.
Cross disciplinary teams
– Horizontal connected teams at the Sichuan Chengfa Aero 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.
Innovation driven organization
– Sichuan Chengfa Aero is one of the most innovative firm in Aerospace & Defense sector.
High switching costs
– The high switching costs that Sichuan Chengfa Aero 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
– Sichuan Chengfa Aero has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sichuan Chengfa Aero 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.
Low bargaining power of suppliers
– Suppliers of Sichuan Chengfa Aero in the Capital Goods sector have low bargaining power. Sichuan Chengfa Aero has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sichuan Chengfa Aero to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For Sichuan Chengfa Aero digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sichuan Chengfa Aero 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.
Weaknesses of Sichuan Chengfa Aero | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sichuan Chengfa Aero are -
Slow decision making process
– As mentioned earlier in the report, Sichuan Chengfa Aero has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. Sichuan Chengfa Aero 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 cash cycle compare to competitors
Sichuan Chengfa Aero has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Sichuan Chengfa Aero has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Interest costs
– Compare to the competition, Sichuan Chengfa Aero 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.
Compensation and incentives
– The revenue per employee of Sichuan Chengfa Aero is just above the Aerospace & Defense 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 Aerospace & Defense industry
– because of the regulatory requirements in China, Sichuan Chengfa Aero 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 Aerospace & Defense industry.
Increasing silos among functional specialists
– The organizational structure of Sichuan Chengfa Aero is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but Sichuan Chengfa Aero needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sichuan Chengfa Aero to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Sichuan Chengfa Aero has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sichuan Chengfa Aero lucrative customers.
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 Sichuan Chengfa Aero supply chain. Even after few cautionary changes, Sichuan Chengfa Aero is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sichuan Chengfa Aero vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Sichuan Chengfa Aero, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Sichuan Chengfa Aero has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Sichuan Chengfa Aero strategy
– From the outside it seems that the employees of Sichuan Chengfa Aero 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.
Sichuan Chengfa Aero Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sichuan Chengfa Aero are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sichuan Chengfa Aero in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. Sichuan Chengfa Aero can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sichuan Chengfa Aero is facing challenges because of the dominance of functional experts in the organization. Sichuan Chengfa Aero can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sichuan Chengfa Aero 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 Sichuan Chengfa Aero to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Sichuan Chengfa Aero 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sichuan Chengfa Aero can use these opportunities to build new business models that can help the communities that Sichuan Chengfa Aero operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.
Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sichuan Chengfa Aero in the Aerospace & Defense industry. Now Sichuan Chengfa Aero can target international markets with far fewer capital restrictions requirements than the existing system.
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 Sichuan Chengfa Aero 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sichuan Chengfa Aero can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Sichuan Chengfa Aero can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sichuan Chengfa Aero 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 Sichuan Chengfa Aero 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 Aerospace & Defense industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sichuan Chengfa Aero can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sichuan Chengfa Aero 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 Sichuan Chengfa Aero to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Sichuan Chengfa Aero External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sichuan Chengfa Aero are -
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 Sichuan Chengfa Aero business can come under increasing regulations regarding data privacy, data security, etc.
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. Sichuan Chengfa Aero needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
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. Sichuan Chengfa Aero 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.
Regulatory challenges
– Sichuan Chengfa Aero 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 Aerospace & Defense industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Sichuan Chengfa Aero with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.
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 Sichuan Chengfa Aero in the Aerospace & Defense sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sichuan Chengfa Aero in Aerospace & Defense industry. The Aerospace & Defense 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.
Consumer confidence and its impact on Sichuan Chengfa Aero 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 Aerospace & Defense industry and other sectors.
High dependence on third party suppliers
– Sichuan Chengfa Aero 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.
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 Sichuan Chengfa Aero.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sichuan Chengfa Aero may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.
Stagnating economy with rate increase
– Sichuan Chengfa Aero 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 Aerospace & Defense industry.
Increasing wage structure of Sichuan Chengfa Aero
– 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 Sichuan Chengfa Aero.
Weighted SWOT Analysis of Sichuan Chengfa Aero Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sichuan Chengfa Aero 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 Sichuan Chengfa Aero 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 Sichuan Chengfa Aero 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 Sichuan Chengfa Aero 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 Sichuan Chengfa Aero needs to make to build a sustainable competitive advantage.