ARTS Group (603017) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for ARTS Group (China)

Based on various researches at Oak Spring University , ARTS Group is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing energy prices, etc

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Introduction to SWOT Analysis of ARTS Group

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

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Strengths of ARTS Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of ARTS Group are -

Ability to lead change in Construction Services

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

Strong track record of project management in the Construction Services industry

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

Effective Research and Development (R&D)

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

Training and development

– ARTS Group 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.

Ability to recruit top talent

– ARTS Group is one of the leading players in the Construction Services 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.

Learning organization

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

Superior customer experience

– The customer experience strategy of ARTS Group in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that ARTS Group 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.

Highly skilled collaborators

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

Analytics focus

– ARTS Group 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 Construction Services 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.

Innovation driven organization

– ARTS Group is one of the most innovative firm in Construction Services sector.

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For ARTS Group digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ARTS Group 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.

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Weaknesses of ARTS Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of ARTS Group are -

Compensation and incentives

– The revenue per employee of ARTS Group is just above the Construction Services 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 ARTS Group, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. ARTS Group has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Increasing silos among functional specialists

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

Slow to strategic competitive environment developments

– As ARTS Group is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.

Interest costs

– Compare to the competition, ARTS Group 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 operating costs

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

High cash cycle compare to competitors

ARTS Group has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow decision making process

– As mentioned earlier in the report, ARTS Group has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. ARTS Group 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.

Employees’ less understanding of ARTS Group strategy

– From the outside it seems that the employees of ARTS Group 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.

Low market penetration in new markets

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

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, ARTS Group 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.

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ARTS Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of ARTS Group are -

Building a culture of innovation

– managers at ARTS Group 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 Construction Services industry.

Developing new processes and practices

– ARTS Group can develop new processes and procedures in Construction Services 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.

Better consumer reach

– The expansion of the 5G network will help ARTS Group to increase its market reach. ARTS Group 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 Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. ARTS Group 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. ARTS Group 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.

Use of Bitcoin and other crypto currencies for transactions in Construction Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for ARTS Group in the Construction Services industry. Now ARTS Group 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, ARTS Group 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for ARTS Group in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.

Redefining models of collaboration and team work

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

Learning at scale

– Online learning technologies has now opened space for ARTS Group 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.

Loyalty marketing

– ARTS Group 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. ARTS Group 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

– ARTS Group can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.

Reforming the budgeting process

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

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Threats ARTS Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of ARTS Group are -

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. ARTS Group needs to understand the core reasons impacting the Construction Services 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. ARTS Group 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.

Shortening product life cycle

– it is one of the major threat that ARTS Group is facing in Construction Services 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 ARTS Group.

Increasing wage structure of ARTS Group

– 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 ARTS Group.

Stagnating economy with rate increase

– ARTS Group 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 Construction Services industry.

Barriers of entry lowering

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

Technology acceleration in Forth Industrial Revolution

– ARTS Group has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, ARTS Group needs to keep up with the evolution of technology in the Construction Services 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 ARTS Group 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 Construction Services industry and other sectors.

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 ARTS Group business can come under increasing regulations regarding data privacy, data security, etc.

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 ARTS Group in the Construction Services sector and impact the bottomline of the organization.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, ARTS Group may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.

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Weighted SWOT Analysis of ARTS Group Template, Example

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

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