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 – talent flight as more people leaving formal jobs, technology disruption, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, wage bills are increasing, increasing energy prices, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, 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 -

Successful track record of launching new products

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

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.

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.

High switching costs

– The high switching costs that Zhonglu A 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.

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.

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.

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.

High brand equity

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

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.

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.

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.

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.

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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 -

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.

Ability to respond to the competition

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

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.

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.

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.

Slow decision making process

– As mentioned earlier in the report, Zhonglu A has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Recreational Products industry over the last five years. Zhonglu A 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.

Workers concerns about automation

– As automation is fast increasing in the Recreational Products industry, Zhonglu A needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

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.

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.

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.

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.

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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 -

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 Zhonglu A 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.

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.

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.

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.

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.

Using analytics as competitive advantage

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

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. Zhonglu A can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

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.

Use of Bitcoin and other crypto currencies for transactions in Recreational Products industry

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Zhonglu A 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.

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.

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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.

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.

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.

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.

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.

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.

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.

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.

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.

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. Zhonglu A 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

– 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.

Increasing wage structure of Zhonglu A

– 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 Zhonglu A.

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.

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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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