First Tractor (601038) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. & Agric. Machinery
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for First Tractor (China)
Based on various researches at Oak Spring University , First Tractor is operating in a macro-environment that has been destablized by – increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, 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 , increasing transportation and logistics costs,
wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that First Tractor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the First Tractor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which First Tractor 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 First Tractor can be done for the following purposes –
1. Strategic planning of First Tractor
2. Improving business portfolio management of First Tractor
3. Assessing feasibility of the new initiative in China
4. Making a Constr. & Agric. Machinery sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of First Tractor
Strengths of First Tractor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of First Tractor are -
High switching costs
– The high switching costs that First Tractor 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.
Low bargaining power of suppliers
– Suppliers of First Tractor in the Capital Goods sector have low bargaining power. First Tractor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps First Tractor to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– First Tractor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled First Tractor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– First Tractor 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 Constr. & Agric. Machinery 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.
Sustainable margins compare to other players in Constr. & Agric. Machinery industry
– First Tractor has clearly differentiated products in the market place. This has enabled First Tractor to fetch slight price premium compare to the competitors in the Constr. & Agric. Machinery industry. The sustainable margins have also helped First Tractor to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– First Tractor is one of the leading players in the Constr. & Agric. Machinery 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.
Innovation driven organization
– First Tractor is one of the most innovative firm in Constr. & Agric. Machinery sector.
Ability to lead change in Constr. & Agric. Machinery
– First Tractor is one of the leading players in the Constr. & Agric. Machinery industry in China. Over the years it has not only transformed the business landscape in the Constr. & Agric. Machinery industry in China but also across the existing markets. The ability to lead change has enabled First Tractor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– First Tractor 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.
Superior customer experience
– The customer experience strategy of First Tractor in Constr. & Agric. Machinery industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– First Tractor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – First Tractor staying ahead in the Constr. & Agric. Machinery industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of First Tractor
– The covid-19 pandemic has put organizational resilience at the centre of everthing First Tractor does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of First Tractor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of First Tractor are -
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 First Tractor supply chain. Even after few cautionary changes, First Tractor is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left First Tractor vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As First Tractor is one of the leading players in the Constr. & Agric. Machinery industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Constr. & Agric. Machinery industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the Constr. & Agric. Machinery industry, First Tractor 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.
High cash cycle compare to competitors
First Tractor has a high cash cycle compare to other players in the Constr. & Agric. Machinery industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on First Tractor ‘s star products
– The top 2 products and services of First Tractor still accounts for major business revenue. This dependence on star products in Constr. & Agric. Machinery industry has resulted into insufficient focus on developing new products, even though First Tractor has relatively successful track record of launching new products.
High bargaining power of channel partners in Constr. & Agric. Machinery industry
– because of the regulatory requirements in China, First Tractor 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 Constr. & Agric. Machinery industry.
Aligning sales with marketing
– From the outside it seems that First Tractor needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. & Agric. Machinery industry have deep experience in developing customer relationships. Marketing department at First Tractor can leverage the sales team experience to cultivate customer relationships as First Tractor is planning to shift buying processes online.
Interest costs
– Compare to the competition, First Tractor 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 First Tractor is just above the Constr. & Agric. Machinery 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.
Ability to respond to the competition
– As the decision making is very deliberative at First Tractor, in the dynamic environment of Constr. & Agric. Machinery industry it has struggled to respond to the nimble upstart competition. First Tractor has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– First Tractor 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.
First Tractor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of First Tractor are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for First Tractor 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 First Tractor to hire the very best people irrespective of their geographical location.
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. First Tractor can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help First Tractor to increase its market reach. First Tractor 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects First Tractor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, First Tractor 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.
Using analytics as competitive advantage
– First Tractor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. & Agric. Machinery sector. This continuous investment in analytics has enabled First Tractor to build a competitive advantage using analytics. The analytics driven competitive advantage can help First Tractor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, First Tractor is facing challenges because of the dominance of functional experts in the organization. First Tractor can utilize new technology in the field of Constr. & Agric. Machinery industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– First Tractor can develop new processes and procedures in Constr. & Agric. Machinery 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, First Tractor can use these opportunities to build new business models that can help the communities that First Tractor operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.
Manufacturing automation
– First Tractor can use the latest technology developments to improve its manufacturing and designing process in Constr. & Agric. Machinery 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.
Creating value in data economy
– The success of analytics program of First Tractor has opened avenues for new revenue streams for the organization in Constr. & Agric. Machinery industry. This can help First Tractor to build a more holistic ecosystem for First Tractor products in the Constr. & Agric. Machinery industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, First Tractor 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 First Tractor to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for First Tractor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. & Agric. Machinery industry, and it will provide faster access to the consumers.
Threats First Tractor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of First Tractor are -
Stagnating economy with rate increase
– First Tractor 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 Constr. & Agric. Machinery industry.
High dependence on third party suppliers
– First Tractor 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.
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 First Tractor business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. & Agric. Machinery industry are lowering. It can presents First Tractor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. & Agric. Machinery 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 First Tractor in the Constr. & Agric. Machinery sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Constr. & Agric. Machinery industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. First Tractor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– First Tractor has witnessed rapid integration of technology during Covid-19 in the Constr. & Agric. Machinery industry. As one of the leading players in the industry, First Tractor needs to keep up with the evolution of technology in the Constr. & Agric. Machinery 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.
Consumer confidence and its impact on First Tractor 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 Constr. & Agric. Machinery industry and other sectors.
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.
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. First Tractor 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.
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.
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 First Tractor.
Environmental challenges
– First Tractor 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. First Tractor can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery industry.
Weighted SWOT Analysis of First Tractor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at First Tractor 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 First Tractor 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 First Tractor 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 First Tractor 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 First Tractor needs to make to build a sustainable competitive advantage.