SWOT Analysis / TOWS Matrix for Hengtong Logistics (China)
Based on various researches at Oak Spring University , Hengtong Logistics is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Hengtong Logistics
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hengtong Logistics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hengtong Logistics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hengtong Logistics 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 Hengtong Logistics can be done for the following purposes –
1. Strategic planning of Hengtong Logistics
2. Improving business portfolio management of Hengtong Logistics
3. Assessing feasibility of the new initiative in China
4. Making a Trucking sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hengtong Logistics
Strengths of Hengtong Logistics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hengtong Logistics are -
Strong track record of project management in the Trucking industry
– Hengtong Logistics is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Hengtong Logistics has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Trucking industry. Secondly the value chain collaborators of Hengtong Logistics have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Hengtong Logistics 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.
Sustainable margins compare to other players in Trucking industry
– Hengtong Logistics has clearly differentiated products in the market place. This has enabled Hengtong Logistics to fetch slight price premium compare to the competitors in the Trucking industry. The sustainable margins have also helped Hengtong Logistics to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Hengtong Logistics has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hengtong Logistics staying ahead in the Trucking industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Hengtong Logistics 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 Trucking 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.
Learning organization
- Hengtong Logistics 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 Hengtong Logistics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hengtong Logistics emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Hengtong Logistics 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.
Superior customer experience
– The customer experience strategy of Hengtong Logistics in Trucking industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Hengtong Logistics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hengtong Logistics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Hengtong Logistics in the Transportation sector have low bargaining power. Hengtong Logistics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hengtong Logistics to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Trucking industry
- digital transformation varies from industry to industry. For Hengtong Logistics digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hengtong Logistics 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.
Weaknesses of Hengtong Logistics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hengtong Logistics are -
Low market penetration in new markets
– Outside its home market of China, Hengtong Logistics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Hengtong Logistics is just above the Trucking 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.
Employees’ less understanding of Hengtong Logistics strategy
– From the outside it seems that the employees of Hengtong Logistics 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 Hengtong Logistics, it seems that company is thinking out the frontier risks that can impact Trucking 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.
Skills based hiring in Trucking industry
– The stress on hiring functional specialists at Hengtong Logistics 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.
High operating costs
– Compare to the competitors, Hengtong Logistics has high operating costs in the Trucking industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hengtong Logistics lucrative customers.
Slow to strategic competitive environment developments
– As Hengtong Logistics is one of the leading players in the Trucking industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Trucking industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Hengtong Logistics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Trucking industry over the last five years. Hengtong Logistics 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.
High cash cycle compare to competitors
Hengtong Logistics has a high cash cycle compare to other players in the Trucking 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 Hengtong Logistics is dominated by functional specialists. It is not different from other players in the Trucking industry, but Hengtong Logistics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hengtong Logistics to focus more on services in the Trucking industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hengtong Logistics is slow explore the new channels of communication. These new channels of communication can help Hengtong Logistics to provide better information regarding Trucking products and services. It can also build an online community to further reach out to potential customers.
Hengtong Logistics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hengtong Logistics are -
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. Hengtong Logistics can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hengtong Logistics is facing challenges because of the dominance of functional experts in the organization. Hengtong Logistics can utilize new technology in the field of Trucking industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hengtong Logistics 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hengtong Logistics can use these opportunities to build new business models that can help the communities that Hengtong Logistics operates in. Secondly it can use opportunities from government spending in Trucking sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hengtong Logistics 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 Hengtong Logistics to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Hengtong Logistics 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.
Use of Bitcoin and other crypto currencies for transactions in Trucking industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hengtong Logistics in the Trucking industry. Now Hengtong Logistics can target international markets with far fewer capital restrictions requirements than the existing system.
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 Hengtong Logistics 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.
Building a culture of innovation
– managers at Hengtong Logistics 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 Trucking industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hengtong Logistics 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 Hengtong Logistics to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Hengtong Logistics to increase its market reach. Hengtong Logistics 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
– Hengtong Logistics 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 Trucking industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hengtong Logistics 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. Hengtong Logistics 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.
Threats Hengtong Logistics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hengtong Logistics are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hengtong Logistics 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 Hengtong Logistics prominent markets.
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 Hengtong Logistics in the Trucking sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Trucking industry are lowering. It can presents Hengtong Logistics with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Trucking sector.
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. Hengtong Logistics 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.
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 Hengtong Logistics business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Hengtong Logistics 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 Trucking industry regulations.
Easy access to finance
– Easy access to finance in Trucking industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hengtong Logistics 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 Hengtong Logistics is facing in Trucking sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hengtong Logistics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Trucking sector.
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. Hengtong Logistics needs to understand the core reasons impacting the Trucking industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Hengtong Logistics 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.
Technology acceleration in Forth Industrial Revolution
– Hengtong Logistics has witnessed rapid integration of technology during Covid-19 in the Trucking industry. As one of the leading players in the industry, Hengtong Logistics needs to keep up with the evolution of technology in the Trucking 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.
Environmental challenges
– Hengtong Logistics 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. Hengtong Logistics can take advantage of this fund but it will also bring new competitors in the Trucking industry.
Weighted SWOT Analysis of Hengtong Logistics Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hengtong Logistics 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 Hengtong Logistics 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 Hengtong Logistics 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 Hengtong Logistics 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 Hengtong Logistics needs to make to build a sustainable competitive advantage.