Evergrande Real Estate (3333) SWOT Analysis / TOWS Matrix / MBA Resources
Construction Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Evergrande Real Estate (Hong Kong)
Based on various researches at Oak Spring University , Evergrande Real Estate is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, etc
Introduction to SWOT Analysis of Evergrande Real Estate
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Evergrande Real Estate can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Evergrande Real Estate, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Evergrande Real Estate 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 Evergrande Real Estate can be done for the following purposes –
1. Strategic planning of Evergrande Real Estate
2. Improving business portfolio management of Evergrande Real Estate
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Evergrande Real Estate
Strengths of Evergrande Real Estate | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Evergrande Real Estate are -
Low bargaining power of suppliers
– Suppliers of Evergrande Real Estate in the Capital Goods sector have low bargaining power. Evergrande Real Estate has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Evergrande Real Estate to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Evergrande Real Estate 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 Construction Services industry
– Evergrande Real Estate has clearly differentiated products in the market place. This has enabled Evergrande Real Estate to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Evergrande Real Estate to invest into research and development (R&D) and innovation.
Strong track record of project management in the Construction Services industry
– Evergrande Real Estate 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
– Evergrande Real Estate has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Evergrande Real Estate have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Evergrande Real Estate has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Evergrande Real Estate to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Evergrande Real Estate
– The covid-19 pandemic has put organizational resilience at the centre of everthing Evergrande Real Estate does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Evergrande Real Estate has one of the best training and development program in Capital Goods 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.
Effective Research and Development (R&D)
– Evergrande Real Estate has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Evergrande Real Estate staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Evergrande Real Estate comprises – understanding the underlying the factors in the Construction 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
– Evergrande Real Estate has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Evergrande Real Estate 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.
Diverse revenue streams
– Evergrande Real Estate is present in almost all the verticals within the Construction Services industry. This has provided Evergrande Real Estate a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses of Evergrande Real Estate | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Evergrande Real Estate are -
High cash cycle compare to competitors
Evergrande Real Estate has a high cash cycle compare to other players in the Construction 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.
Interest costs
– Compare to the competition, Evergrande Real Estate 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.
Low market penetration in new markets
– Outside its home market of Hong Kong, Evergrande Real Estate needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Evergrande Real Estate 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.
Slow to strategic competitive environment developments
– As Evergrande Real Estate is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.
Compensation and incentives
– The revenue per employee of Evergrande Real Estate is just above the Construction Services 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 Evergrande Real Estate strategy
– From the outside it seems that the employees of Evergrande Real Estate 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.
Lack of clear differentiation of Evergrande Real Estate products
– To increase the profitability and margins on the products, Evergrande Real Estate needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Evergrande Real Estate 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.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in Hong Kong, Evergrande Real Estate is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Construction Services industry.
No frontier risks strategy
– From the 10K / annual statement of Evergrande Real Estate, it seems that company is thinking out the frontier risks that can impact Construction 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.
Evergrande Real Estate Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Evergrande Real Estate are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Evergrande Real Estate is facing challenges because of the dominance of functional experts in the organization. Evergrande Real Estate can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 Evergrande Real Estate 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.
Learning at scale
– Online learning technologies has now opened space for Evergrande Real Estate 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.
Creating value in data economy
– The success of analytics program of Evergrande Real Estate has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Evergrande Real Estate to build a more holistic ecosystem for Evergrande Real Estate products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Evergrande Real Estate can use these opportunities to build new business models that can help the communities that Evergrande Real Estate operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Using analytics as competitive advantage
– Evergrande Real Estate has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Evergrande Real Estate to build a competitive advantage using analytics. The analytics driven competitive advantage can help Evergrande Real Estate to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Evergrande Real Estate in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.
Manufacturing automation
– Evergrande Real Estate can use the latest technology developments to improve its manufacturing and designing process in Construction 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Evergrande Real Estate 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. Evergrande Real Estate 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.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Evergrande Real Estate in the Construction Services industry. Now Evergrande Real Estate can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Evergrande Real Estate 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Evergrande Real Estate can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Evergrande Real Estate can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Evergrande Real Estate External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Evergrande Real Estate 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Evergrande Real Estate may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services 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. Evergrande Real Estate needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Evergrande Real Estate 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 Construction Services industry.
Easy access to finance
– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Evergrande Real Estate can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 Evergrande Real Estate business can come under increasing regulations regarding data privacy, data security, etc.
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 Evergrande Real Estate in the Construction Services sector and impact the bottomline of the organization.
Regulatory challenges
– Evergrande Real Estate 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 Construction Services industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Evergrande Real Estate 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 Evergrande Real Estate prominent markets.
Environmental challenges
– Evergrande Real Estate 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. Evergrande Real Estate can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Evergrande Real Estate with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
Consumer confidence and its impact on Evergrande Real Estate 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 Construction Services industry and other sectors.
Weighted SWOT Analysis of Evergrande Real Estate Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Evergrande Real Estate 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 Evergrande Real Estate 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 Evergrande Real Estate 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 Evergrande Real Estate 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 Evergrande Real Estate needs to make to build a sustainable competitive advantage.
