Zhong Fu Tong (300560) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Zhong Fu Tong (China)

Based on various researches at Oak Spring University , Zhong Fu Tong is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , technology disruption, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Zhong Fu Tong

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

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Strengths of Zhong Fu Tong | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Zhong Fu Tong are -

Organizational Resilience of Zhong Fu Tong

– The covid-19 pandemic has put organizational resilience at the centre of everthing Zhong Fu Tong does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– Zhong Fu Tong is one of the leading players in the Communications 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.

Training and development

– Zhong Fu Tong has one of the best training and development program in Services 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.

Strong track record of project management in the Communications Services industry

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

High brand equity

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

Operational resilience

– The operational resilience strategy of Zhong Fu Tong comprises – understanding the underlying the factors in the Communications Services 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.

Successful track record of launching new products

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

Learning organization

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

Analytics focus

– Zhong Fu Tong 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 Communications 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.

Ability to lead change in Communications Services

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

Sustainable margins compare to other players in Communications Services industry

– Zhong Fu Tong has clearly differentiated products in the market place. This has enabled Zhong Fu Tong to fetch slight price premium compare to the competitors in the Communications Services industry. The sustainable margins have also helped Zhong Fu Tong to invest into research and development (R&D) and innovation.

Effective Research and Development (R&D)

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

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Weaknesses of Zhong Fu Tong | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Zhong Fu Tong are -

Low market penetration in new markets

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

Interest costs

– Compare to the competition, Zhong Fu Tong 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.

Skills based hiring in Communications Services industry

– The stress on hiring functional specialists at Zhong Fu Tong 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.

Lack of clear differentiation of Zhong Fu Tong products

– To increase the profitability and margins on the products, Zhong Fu Tong needs to provide more differentiated products than what it is currently offering in the marketplace.

No frontier risks strategy

– From the 10K / annual statement of Zhong Fu Tong, it seems that company is thinking out the frontier risks that can impact Communications Services 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.

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

High cash cycle compare to competitors

Zhong Fu Tong has a high cash cycle compare to other players in the Communications 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.

Increasing silos among functional specialists

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

Workers concerns about automation

– As automation is fast increasing in the Communications Services industry, Zhong Fu Tong 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.

Slow to strategic competitive environment developments

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

Employees’ less understanding of Zhong Fu Tong strategy

– From the outside it seems that the employees of Zhong Fu Tong 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.

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Zhong Fu Tong Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Zhong Fu Tong are -

Building a culture of innovation

– managers at Zhong Fu Tong 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 Communications Services industry.

Better consumer reach

– The expansion of the 5G network will help Zhong Fu Tong to increase its market reach. Zhong Fu Tong 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

– Zhong Fu Tong 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Communications Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zhong Fu Tong 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. Zhong Fu Tong 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.

Learning at scale

– Online learning technologies has now opened space for Zhong Fu Tong 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.

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. Zhong Fu Tong can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Reforming the budgeting process

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

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 Zhong Fu Tong 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Zhong Fu Tong 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 Zhong Fu Tong in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Communications Services industry, and it will provide faster access to the consumers.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zhong Fu Tong can use these opportunities to build new business models that can help the communities that Zhong Fu Tong operates in. Secondly it can use opportunities from government spending in Communications Services sector.

Manufacturing automation

– Zhong Fu Tong can use the latest technology developments to improve its manufacturing and designing process in Communications 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.

Redefining models of collaboration and team work

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

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Threats Zhong Fu Tong External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Zhong Fu Tong are -

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 Zhong Fu Tong.

Technology acceleration in Forth Industrial Revolution

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

Learning curve for new practices

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

Easy access to finance

– Easy access to finance in Communications Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zhong Fu Tong 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 Zhong Fu Tong is facing in Communications Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. Zhong Fu Tong 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.

Barriers of entry lowering

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

Stagnating economy with rate increase

– Zhong Fu Tong 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 Communications Services industry.

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. Zhong Fu Tong needs to understand the core reasons impacting the Communications Services industry. This will help it in building a better workplace.

Regulatory challenges

– Zhong Fu Tong 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 Communications Services industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Zhong Fu Tong in Communications Services industry. The Communications Services 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.

Environmental challenges

– Zhong Fu Tong 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. Zhong Fu Tong can take advantage of this fund but it will also bring new competitors in the Communications Services industry.

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Weighted SWOT Analysis of Zhong Fu Tong Template, Example

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

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