Yunnan Coal Energy (600792) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Yunnan Coal Energy (China)
Based on various researches at Oak Spring University , Yunnan Coal Energy is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing transportation and logistics costs, there is backlash against globalization,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Yunnan Coal Energy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Yunnan Coal Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Yunnan Coal Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Yunnan Coal Energy 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 Yunnan Coal Energy can be done for the following purposes –
1. Strategic planning of Yunnan Coal Energy
2. Improving business portfolio management of Yunnan Coal Energy
3. Assessing feasibility of the new initiative in China
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Yunnan Coal Energy
Strengths of Yunnan Coal Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Yunnan Coal Energy are -
Operational resilience
– The operational resilience strategy of Yunnan Coal Energy comprises – understanding the underlying the factors in the Iron & Steel 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 switching costs
– The high switching costs that Yunnan Coal Energy 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.
Training and development
– Yunnan Coal Energy has one of the best training and development program in Basic Materials 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.
High brand equity
– Yunnan Coal Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Yunnan Coal Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Yunnan Coal Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Yunnan Coal Energy 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.
Low bargaining power of suppliers
– Suppliers of Yunnan Coal Energy in the Basic Materials sector have low bargaining power. Yunnan Coal Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Yunnan Coal Energy to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Yunnan Coal Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Yunnan Coal Energy staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Yunnan Coal Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Yunnan Coal Energy 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.
Organizational Resilience of Yunnan Coal Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Yunnan Coal Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Yunnan Coal Energy is one of the most innovative firm in Iron & Steel sector.
Learning organization
- Yunnan Coal Energy 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 Yunnan Coal Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Yunnan Coal Energy emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Yunnan Coal Energy 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.
Weaknesses of Yunnan Coal Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Yunnan Coal Energy are -
Interest costs
– Compare to the competition, Yunnan Coal Energy 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.
Employees’ less understanding of Yunnan Coal Energy strategy
– From the outside it seems that the employees of Yunnan Coal Energy 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.
No frontier risks strategy
– From the 10K / annual statement of Yunnan Coal Energy, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.
Slow decision making process
– As mentioned earlier in the report, Yunnan Coal Energy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Yunnan Coal Energy 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.
Lack of clear differentiation of Yunnan Coal Energy products
– To increase the profitability and margins on the products, Yunnan Coal Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in China, Yunnan Coal Energy 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 Iron & Steel industry.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Yunnan Coal Energy 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.
Need for greater diversity
– Yunnan Coal Energy 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.
Workers concerns about automation
– As automation is fast increasing in the Iron & Steel industry, Yunnan Coal Energy 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.
Capital Spending Reduction
– Even during the low interest decade, Yunnan Coal Energy 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 Iron & Steel industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Yunnan Coal Energy is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Yunnan Coal Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Yunnan Coal Energy to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
Yunnan Coal Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Yunnan Coal Energy 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, Yunnan Coal Energy can use these opportunities to build new business models that can help the communities that Yunnan Coal Energy operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Yunnan Coal Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Yunnan Coal Energy 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 Yunnan Coal Energy to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Yunnan Coal Energy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Yunnan Coal Energy is facing challenges because of the dominance of functional experts in the organization. Yunnan Coal Energy can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. Yunnan Coal Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Yunnan Coal Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Yunnan Coal Energy can develop new processes and procedures in Iron & Steel 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Yunnan Coal Energy 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. Yunnan Coal Energy 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.
Using analytics as competitive advantage
– Yunnan Coal Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled Yunnan Coal Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Yunnan Coal Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Yunnan Coal Energy to increase its market reach. Yunnan Coal Energy 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.
Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Yunnan Coal Energy in the Iron & Steel industry. Now Yunnan Coal Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Yunnan Coal Energy 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 Yunnan Coal Energy 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 Yunnan Coal Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Yunnan Coal Energy are -
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. Yunnan Coal Energy 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Yunnan Coal Energy 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 Yunnan Coal Energy prominent markets.
Environmental challenges
– Yunnan Coal Energy 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. Yunnan Coal Energy can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Regulatory challenges
– Yunnan Coal Energy 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 Iron & Steel industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Yunnan Coal Energy in Iron & Steel industry. The Iron & Steel 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.
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.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Yunnan Coal Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Yunnan Coal Energy.
Increasing wage structure of Yunnan Coal Energy
– 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 Yunnan Coal Energy.
High dependence on third party suppliers
– Yunnan Coal Energy 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.
Consumer confidence and its impact on Yunnan Coal Energy 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 Iron & Steel 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 Yunnan Coal Energy business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Yunnan Coal Energy has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Yunnan Coal Energy needs to keep up with the evolution of technology in the Iron & Steel 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.
Weighted SWOT Analysis of Yunnan Coal Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Yunnan Coal Energy 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 Yunnan Coal Energy 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 Yunnan Coal Energy 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 Yunnan Coal Energy 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 Yunnan Coal Energy needs to make to build a sustainable competitive advantage.
