Xining Special Steel (600117) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Xining Special Steel (China)

Based on various researches at Oak Spring University , Xining Special Steel is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of Xining Special Steel

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

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Strengths of Xining Special Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Xining Special Steel are -

Training and development

– Xining Special Steel 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.

Organizational Resilience of Xining Special Steel

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

Innovation driven organization

– Xining Special Steel is one of the most innovative firm in Iron & Steel sector.

Low bargaining power of suppliers

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

Diverse revenue streams

– Xining Special Steel is present in almost all the verticals within the Iron & Steel industry. This has provided Xining Special Steel 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.

Highly skilled collaborators

– Xining Special Steel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Xining Special Steel have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

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

Learning organization

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

Ability to recruit top talent

– Xining Special Steel is one of the leading players in the Iron & Steel 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)

– Xining Special Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Xining Special Steel staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Superior customer experience

– The customer experience strategy of Xining Special Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

– Xining Special Steel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Xining Special Steel 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 Xining Special Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Xining Special Steel are -

No frontier risks strategy

– From the 10K / annual statement of Xining Special Steel, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.

Capital Spending Reduction

– Even during the low interest decade, Xining Special Steel 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 Iron & Steel industry using digital technology.

High cash cycle compare to competitors

Xining Special Steel has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Lack of clear differentiation of Xining Special Steel products

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

Slow to strategic competitive environment developments

– As Xining Special Steel is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.

Aligning sales with marketing

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

Employees’ less understanding of Xining Special Steel strategy

– From the outside it seems that the employees of Xining Special Steel 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 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 Xining Special Steel supply chain. Even after few cautionary changes, Xining Special Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Xining Special Steel vulnerable to further global disruptions in South East Asia.

Products dominated business model

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

High dependence on Xining Special Steel ‘s star products

– The top 2 products and services of Xining Special Steel still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though Xining Special Steel has relatively successful track record of launching new products.

Need for greater diversity

– Xining Special Steel 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.

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Xining Special Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Xining Special Steel are -

Building a culture of innovation

– managers at Xining Special Steel 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 Iron & Steel industry.

Creating value in data economy

– The success of analytics program of Xining Special Steel has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Xining Special Steel to build a more holistic ecosystem for Xining Special Steel products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Xining Special Steel 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 Xining Special Steel to hire the very best people irrespective of their geographical location.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Xining Special Steel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Xining Special Steel can use these opportunities to build new business models that can help the communities that Xining Special Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.

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. Xining Special Steel can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Redefining models of collaboration and team work

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

Manufacturing automation

– Xining Special Steel can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. Xining Special Steel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Xining Special Steel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help Xining Special Steel to increase its market reach. Xining Special Steel 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.

Leveraging digital technologies

– Xining Special Steel 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.

Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Xining Special Steel in the Iron & Steel industry. Now Xining Special Steel can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats Xining Special Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Xining Special Steel are -

Easy access to finance

– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Xining Special Steel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Xining Special Steel 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 Xining Special Steel prominent markets.

Learning curve for new practices

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

Increasing wage structure of Xining Special Steel

– 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 Xining Special Steel.

Environmental challenges

– Xining Special Steel 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. Xining Special Steel can take advantage of this fund but it will also bring new competitors in the Iron & Steel 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.

Technology acceleration in Forth Industrial Revolution

– Xining Special Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Xining Special Steel needs to keep up with the evolution of technology in the Iron & Steel 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.

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. Xining Special Steel 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 dependence on third party suppliers

– Xining Special Steel 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

– Xining Special Steel 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 Iron & Steel industry.

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 Xining Special Steel business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of Xining Special Steel Template, Example

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

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