China Railway (1186) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Railway (Hong Kong)

Based on various researches at Oak Spring University , China Railway is operating in a macro-environment that has been destablized by – technology disruption, supply chains are disrupted by pandemic , increasing energy prices, increasing commodity prices, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, etc

---

---

---

---

Introduction to SWOT Analysis of China Railway

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Railway can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Railway, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Railway 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 China Railway can be done for the following purposes –
1. Strategic planning of China Railway
2. Improving business portfolio management of China Railway
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 China Railway

---

Strengths of China Railway | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of China Railway are -

Digital Transformation in Construction Services industry

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

Successful track record of launching new products

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

Training and development

– China Railway 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.

High brand equity

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

High switching costs

– The high switching costs that China Railway 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.

Organizational Resilience of China Railway

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

Superior customer experience

– The customer experience strategy of China Railway in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Operational resilience

– The operational resilience strategy of China Railway 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.

Effective Research and Development (R&D)

– China Railway has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Railway 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.

Strong track record of project management in the Construction Services industry

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

Analytics focus

– China Railway 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 Construction Services industry. The technology infrastructure of Hong Kong 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.

Diverse revenue streams

– China Railway is present in almost all the verticals within the Construction Services industry. This has provided China Railway 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 China Railway | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of China Railway are -

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, China Railway 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.

Ability to respond to the competition

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

Slow decision making process

– As mentioned earlier in the report, China Railway has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. China Railway 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.

Compensation and incentives

– The revenue per employee of China Railway 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at China Railway 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.

No frontier risks strategy

– From the 10K / annual statement of China Railway, 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.

Interest costs

– Compare to the competition, China Railway 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.

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

Aligning sales with marketing

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

Lack of clear differentiation of China Railway products

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

High dependence on China Railway ‘s star products

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

---

China Railway Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of China Railway are -

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. China Railway can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Harnessing reconfiguration of the global supply chains

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

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Railway 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 China Railway to hire the very best people irrespective of their geographical location.

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. China Railway 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. China Railway 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.

Leveraging digital technologies

– China Railway 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 China Railway 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.

Developing new processes and practices

– China Railway can develop new processes and procedures in Construction Services 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.

Loyalty marketing

– China Railway 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.

Manufacturing automation

– China Railway 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects China Railway 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

– China Railway can improve the customer journey of consumers in the Construction Services 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for China Railway 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.

Creating value in data economy

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

---

Threats China Railway External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of China Railway are -

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 China Railway business can come under increasing regulations regarding data privacy, data security, etc.

Shortening product life cycle

– it is one of the major threat that China Railway is facing in Construction Services 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, China Railway 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.

Environmental challenges

– China Railway 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. China Railway can take advantage of this fund but it will also bring new competitors in the Construction Services 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 China Railway.

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. China Railway 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

– China Railway 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.

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.

High dependence on third party suppliers

– China Railway 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 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 China Railway in the Construction Services sector and impact the bottomline of the organization.

Increasing wage structure of China Railway

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of China Railway.

Regulatory challenges

– China Railway 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.

---

Weighted SWOT Analysis of China Railway Template, Example

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

--- ---