Liuzhou Chemical (600423) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Liuzhou Chemical (China)

Based on various researches at Oak Spring University , Liuzhou Chemical is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing energy prices, technology disruption, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing commodity prices, geopolitical disruptions, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Liuzhou Chemical

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

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Strengths of Liuzhou Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Liuzhou Chemical are -

Strong track record of project management in the Chemical Manufacturing industry

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

Digital Transformation in Chemical Manufacturing industry

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

Training and development

– Liuzhou Chemical 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.

Successful track record of launching new products

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

Organizational Resilience of Liuzhou Chemical

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

High switching costs

– The high switching costs that Liuzhou Chemical 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.

Innovation driven organization

– Liuzhou Chemical is one of the most innovative firm in Chemical Manufacturing sector.

Highly skilled collaborators

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

Cross disciplinary teams

– Horizontal connected teams at the Liuzhou Chemical 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.

Operational resilience

– The operational resilience strategy of Liuzhou Chemical comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Effective Research and Development (R&D)

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

Analytics focus

– Liuzhou Chemical 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 Chemical Manufacturing 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.

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Weaknesses of Liuzhou Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Liuzhou Chemical are -

Lack of clear differentiation of Liuzhou Chemical products

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

Capital Spending Reduction

– Even during the low interest decade, Liuzhou Chemical 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 Chemical Manufacturing industry using digital technology.

No frontier risks strategy

– From the 10K / annual statement of Liuzhou Chemical, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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 Liuzhou Chemical supply chain. Even after few cautionary changes, Liuzhou Chemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Liuzhou Chemical vulnerable to further global disruptions in South East Asia.

Compensation and incentives

– The revenue per employee of Liuzhou Chemical is just above the Chemical Manufacturing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Ability to respond to the competition

– As the decision making is very deliberative at Liuzhou Chemical, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Liuzhou Chemical has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Workers concerns about automation

– As automation is fast increasing in the Chemical Manufacturing industry, Liuzhou Chemical 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.

Aligning sales with marketing

– From the outside it seems that Liuzhou Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Liuzhou Chemical can leverage the sales team experience to cultivate customer relationships as Liuzhou Chemical is planning to shift buying processes online.

Slow to strategic competitive environment developments

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

High cash cycle compare to competitors

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

High dependence on Liuzhou Chemical ‘s star products

– The top 2 products and services of Liuzhou Chemical still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Liuzhou Chemical has relatively successful track record of launching new products.

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Liuzhou Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Liuzhou Chemical are -

Leveraging digital technologies

– Liuzhou Chemical 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.

Learning at scale

– Online learning technologies has now opened space for Liuzhou Chemical 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Liuzhou Chemical 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. Liuzhou Chemical 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Liuzhou Chemical 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 Liuzhou Chemical to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. Liuzhou Chemical 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. Liuzhou Chemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Lowering marketing communication costs

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

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Liuzhou Chemical in the Chemical Manufacturing industry. Now Liuzhou Chemical can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Liuzhou Chemical can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Increase in government spending

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

Reforming the budgeting process

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

Buying journey improvements

– Liuzhou Chemical can improve the customer journey of consumers in the Chemical Manufacturing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Creating value in data economy

– The success of analytics program of Liuzhou Chemical has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Liuzhou Chemical to build a more holistic ecosystem for Liuzhou Chemical products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Liuzhou Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Liuzhou Chemical are -

Environmental challenges

– Liuzhou Chemical 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. Liuzhou Chemical can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

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.

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 Liuzhou Chemical in the Chemical Manufacturing sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Liuzhou Chemical in Chemical Manufacturing industry. The Chemical Manufacturing 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.

Consumer confidence and its impact on Liuzhou Chemical 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 Chemical Manufacturing industry and other sectors.

Shortening product life cycle

– it is one of the major threat that Liuzhou Chemical is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Liuzhou Chemical.

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.

Barriers of entry lowering

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

Regulatory challenges

– Liuzhou Chemical 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 Chemical Manufacturing industry regulations.

Stagnating economy with rate increase

– Liuzhou Chemical 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 Chemical Manufacturing industry.

Learning curve for new practices

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

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Liuzhou Chemical can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of Liuzhou Chemical Template, Example

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

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