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 – wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc

---

---

---

---

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.

---

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

---

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

The strengths of Zhonglu A are -

Low bargaining power of suppliers

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

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.

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.

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.

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.

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.

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.

Superior customer experience

– The customer experience strategy of Zhonglu A in Recreational Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Zhonglu A 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 Recreational Products 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.

Strong track record of project management in the Recreational Products industry

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

---

---

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

The weaknesses of Zhonglu A are -

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.

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.

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.

Skills based hiring in Recreational Products industry

– The stress on hiring functional specialists at Zhonglu A 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.

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 Zhonglu A supply chain. Even after few cautionary changes, Zhonglu A is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zhonglu A vulnerable to further global disruptions in South East Asia.

Capital Spending Reduction

– Even during the low interest decade, Zhonglu A 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 Recreational Products industry using digital technology.

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.

High bargaining power of channel partners in Recreational Products industry

– because of the regulatory requirements in China, Zhonglu A 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 Recreational Products industry.

High dependence on Zhonglu A ‘s star products

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

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.

Increasing silos among functional specialists

– The organizational structure of Zhonglu A is dominated by functional specialists. It is not different from other players in the Recreational Products industry, but Zhonglu A needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zhonglu A to focus more on services in the Recreational Products industry rather than just following the product oriented approach.

---

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

The opportunities of Zhonglu A are -

Remote work and new talent hiring opportunities

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

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.

Manufacturing automation

– Zhonglu A can use the latest technology developments to improve its manufacturing and designing process in Recreational Products 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.

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.

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.

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.

Leveraging digital technologies

– Zhonglu A 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.

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.

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.

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.

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.

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.

---

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

The threats of Zhonglu A are -

Technology acceleration in Forth Industrial Revolution

– Zhonglu A has witnessed rapid integration of technology during Covid-19 in the Recreational Products industry. As one of the leading players in the industry, Zhonglu A needs to keep up with the evolution of technology in the Recreational Products 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.

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.

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.

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.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Zhonglu A in Recreational Products industry. The Recreational Products 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.

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.

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.

Regulatory challenges

– Zhonglu A 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 Recreational Products industry regulations.

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.

---

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.

--- ---