Zhonglu A (600818) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Zhonglu A (China)

Based on various researches at Oak Spring University , Zhonglu A is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Zhonglu A

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

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

The strengths of Zhonglu A are -

Ability to lead change in Recreational Products

– Zhonglu A is one of the leading players in the Recreational Products industry in China. Over the years it has not only transformed the business landscape in the Recreational Products industry in China but also across the existing markets. The ability to lead change has enabled Zhonglu A in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Sustainable margins compare to other players in Recreational Products industry

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

Highly skilled collaborators

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

Digital Transformation in Recreational Products industry

- digital transformation varies from industry to industry. For Zhonglu A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zhonglu A 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 Zhonglu A comprises – understanding the underlying the factors in the Recreational Products 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.

Learning organization

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

Effective Research and Development (R&D)

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

Cross disciplinary teams

– Horizontal connected teams at the Zhonglu A 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

– Zhonglu A is one of the most innovative firm in Recreational Products sector.

Training and development

– Zhonglu A has one of the best training and development program in Consumer Cyclical 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 Zhonglu A

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

Diverse revenue streams

– Zhonglu A is present in almost all the verticals within the Recreational Products industry. This has provided Zhonglu A 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.

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

The weaknesses of Zhonglu A are -

Products dominated business model

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

Interest costs

– Compare to the competition, Zhonglu A 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.

Lack of clear differentiation of Zhonglu A products

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

High operating costs

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

Aligning sales with marketing

– From the outside it seems that Zhonglu A needs to have more collaboration between its sales team and marketing team. Sales professionals in the Recreational Products industry have deep experience in developing customer relationships. Marketing department at Zhonglu A can leverage the sales team experience to cultivate customer relationships as Zhonglu A 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, Zhonglu A is slow explore the new channels of communication. These new channels of communication can help Zhonglu A to provide better information regarding Recreational Products products and services. It can also build an online community to further reach out to potential customers.

High cash cycle compare to competitors

Zhonglu A has a high cash cycle compare to other players in the Recreational Products 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

– Zhonglu A 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.

No frontier risks strategy

– From the 10K / annual statement of Zhonglu A, it seems that company is thinking out the frontier risks that can impact Recreational Products 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.

Low market penetration in new markets

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

Employees’ less understanding of Zhonglu A strategy

– From the outside it seems that the employees of Zhonglu A 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.

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

The opportunities of Zhonglu A are -

Increase in government spending

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

Finding new ways to collaborate

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

Developing new processes and practices

– Zhonglu A can develop new processes and procedures in Recreational Products 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.

Buying journey improvements

– Zhonglu A can improve the customer journey of consumers in the Recreational Products 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 Zhonglu A in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Recreational Products industry, and it will provide faster access to the consumers.

Learning at scale

– Online learning technologies has now opened space for Zhonglu A 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.

Redefining models of collaboration and team work

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

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Zhonglu A 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 Zhonglu A to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Better consumer reach

– The expansion of the 5G network will help Zhonglu A to increase its market reach. Zhonglu A 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Recreational Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zhonglu A 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. Zhonglu A 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.

Loyalty marketing

– Zhonglu A 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.

Creating value in data economy

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

Building a culture of innovation

– managers at Zhonglu A 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 Recreational Products industry.

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

The threats of Zhonglu A are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Zhonglu A may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Recreational Products 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 Zhonglu A business can come under increasing regulations regarding data privacy, data security, etc.

Increasing international competition and downward pressure on margins

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

Easy access to finance

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

Environmental challenges

– Zhonglu A 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. Zhonglu A can take advantage of this fund but it will also bring new competitors in the Recreational Products industry.

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

– Zhonglu A 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.

Shortening product life cycle

– it is one of the major threat that Zhonglu A is facing in Recreational Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Zhonglu A.

Consumer confidence and its impact on Zhonglu A 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 Recreational Products industry and other sectors.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Recreational Products industry are lowering. It can presents Zhonglu A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Recreational Products sector.

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. Zhonglu A needs to understand the core reasons impacting the Recreational Products industry. This will help it in building a better workplace.

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 Zhonglu A in the Recreational Products sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of Zhonglu A Template, Example

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

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