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 – competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, wage bills are increasing, there is increasing trade war between United States & China, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Operational resilience
– The operational resilience strategy of Hengtong Logistics comprises – understanding the underlying the factors in the Trucking 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.
Ability to recruit top talent
– Hengtong Logistics is one of the leading players in the Trucking 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
- 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.
Ability to lead change in Trucking
– Hengtong Logistics is one of the leading players in the Trucking industry in China. Over the years it has not only transformed the business landscape in the Trucking industry in China but also across the existing markets. The ability to lead change has enabled Hengtong Logistics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Training and development
– Hengtong Logistics has one of the best training and development program in Transportation 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 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.
Innovation driven organization
– Hengtong Logistics is one of the most innovative firm in Trucking sector.
Organizational Resilience of Hengtong Logistics
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hengtong Logistics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Weaknesses of Hengtong Logistics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hengtong Logistics are -
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.
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.
Aligning sales with marketing
– From the outside it seems that Hengtong Logistics needs to have more collaboration between its sales team and marketing team. Sales professionals in the Trucking industry have deep experience in developing customer relationships. Marketing department at Hengtong Logistics can leverage the sales team experience to cultivate customer relationships as Hengtong Logistics is planning to shift buying processes online.
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.
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.
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.
High dependence on Hengtong Logistics ‘s star products
– The top 2 products and services of Hengtong Logistics still accounts for major business revenue. This dependence on star products in Trucking industry has resulted into insufficient focus on developing new products, even though Hengtong Logistics has relatively successful track record of launching new products.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Hengtong Logistics, in the dynamic environment of Trucking industry it has struggled to respond to the nimble upstart competition. Hengtong Logistics has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Hengtong Logistics has some of the most successful models in the Trucking industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hengtong Logistics should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Hengtong Logistics 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.
Hengtong Logistics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hengtong Logistics are -
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.
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.
Creating value in data economy
– The success of analytics program of Hengtong Logistics has opened avenues for new revenue streams for the organization in Trucking industry. This can help Hengtong Logistics to build a more holistic ecosystem for Hengtong Logistics products in the Trucking industry by providing – data insight services, data privacy related products, data based consulting services, 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.
Learning at scale
– Online learning technologies has now opened space for Hengtong Logistics 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.
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.
Manufacturing automation
– Hengtong Logistics can use the latest technology developments to improve its manufacturing and designing process in Trucking 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Trucking industry, but it has also influenced the consumer preferences. Hengtong Logistics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Hengtong Logistics can develop new processes and procedures in Trucking 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hengtong Logistics in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Trucking industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Hengtong Logistics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Trucking sector. This continuous investment in analytics has enabled Hengtong Logistics to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hengtong Logistics 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 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.
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.
Threats Hengtong Logistics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hengtong Logistics are -
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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hengtong Logistics in Trucking industry. The Trucking 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
– 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.
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 Hengtong Logistics.
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.
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.
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.
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.
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.