Shanghai Electric (2727) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Shanghai Electric (Hong Kong)
Based on various researches at Oak Spring University , Shanghai Electric is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing commodity prices, increasing household debt because of falling income levels, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, central banks are concerned over increasing inflation,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Shanghai Electric
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shanghai Electric can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shanghai Electric, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shanghai Electric 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 Shanghai Electric can be done for the following purposes –
1. Strategic planning of Shanghai Electric
2. Improving business portfolio management of Shanghai Electric
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shanghai Electric
Strengths of Shanghai Electric | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shanghai Electric are -
Diverse revenue streams
– Shanghai Electric is present in almost all the verticals within the Misc. Capital Goods industry. This has provided Shanghai Electric 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.
Operational resilience
– The operational resilience strategy of Shanghai Electric comprises – understanding the underlying the factors in the Misc. Capital Goods 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 lead change in Misc. Capital Goods
– Shanghai Electric is one of the leading players in the Misc. Capital Goods industry in Hong Kong. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Shanghai Electric 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 Shanghai Electric 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.
High brand equity
– Shanghai Electric has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shanghai Electric to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Shanghai Electric has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shanghai Electric 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.
Low bargaining power of suppliers
– Suppliers of Shanghai Electric in the Capital Goods sector have low bargaining power. Shanghai Electric has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shanghai Electric to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Shanghai Electric 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.
Innovation driven organization
– Shanghai Electric is one of the most innovative firm in Misc. Capital Goods sector.
Organizational Resilience of Shanghai Electric
– The covid-19 pandemic has put organizational resilience at the centre of everthing Shanghai Electric does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Misc. Capital Goods industry
– Shanghai Electric is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Misc. Capital Goods industry
– Shanghai Electric has clearly differentiated products in the market place. This has enabled Shanghai Electric to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Shanghai Electric to invest into research and development (R&D) and innovation.
Weaknesses of Shanghai Electric | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanghai Electric are -
Workers concerns about automation
– As automation is fast increasing in the Misc. Capital Goods industry, Shanghai Electric 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.
Increasing silos among functional specialists
– The organizational structure of Shanghai Electric is dominated by functional specialists. It is not different from other players in the Misc. Capital Goods industry, but Shanghai Electric needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Shanghai Electric to focus more on services in the Misc. Capital Goods industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Shanghai Electric is just above the Misc. Capital Goods 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.
Low market penetration in new markets
– Outside its home market of Hong Kong, Shanghai Electric needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Shanghai Electric supply chain. Even after few cautionary changes, Shanghai Electric is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shanghai Electric vulnerable to further global disruptions in South East Asia.
High dependence on Shanghai Electric ‘s star products
– The top 2 products and services of Shanghai Electric still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though Shanghai Electric has relatively successful track record of launching new products.
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at Shanghai Electric 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.
Lack of clear differentiation of Shanghai Electric products
– To increase the profitability and margins on the products, Shanghai Electric needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Shanghai Electric has high operating costs in the Misc. Capital Goods industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shanghai Electric lucrative customers.
Products dominated business model
– Even though Shanghai Electric has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Shanghai Electric should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Shanghai Electric has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Capital Goods industry over the last five years. Shanghai Electric 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.
Shanghai Electric Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shanghai Electric are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shanghai Electric 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 Shanghai Electric to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. Shanghai Electric can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Shanghai Electric has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help Shanghai Electric to build a more holistic ecosystem for Shanghai Electric products in the Misc. Capital Goods industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Shanghai Electric can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Shanghai Electric can develop new processes and procedures in Misc. Capital Goods 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Shanghai Electric is facing challenges because of the dominance of functional experts in the organization. Shanghai Electric can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Misc. Capital Goods industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Shanghai Electric in the Misc. Capital Goods industry. Now Shanghai Electric can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Capital Goods industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Shanghai Electric 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. Shanghai Electric 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.
Better consumer reach
– The expansion of the 5G network will help Shanghai Electric to increase its market reach. Shanghai Electric 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shanghai Electric can use these opportunities to build new business models that can help the communities that Shanghai Electric operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Leveraging digital technologies
– Shanghai Electric 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.
Buying journey improvements
– Shanghai Electric can improve the customer journey of consumers in the Misc. Capital Goods 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 Shanghai Electric in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods industry, and it will provide faster access to the consumers.
Threats Shanghai Electric External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shanghai Electric are -
Regulatory challenges
– Shanghai Electric 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 Misc. Capital Goods industry regulations.
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. Shanghai Electric 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.
Increasing wage structure of Shanghai Electric
– 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 Shanghai Electric.
Shortening product life cycle
– it is one of the major threat that Shanghai Electric is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 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. Shanghai Electric needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Shanghai Electric in Misc. Capital Goods industry. The Misc. Capital Goods 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Shanghai Electric may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Capital Goods sector.
High dependence on third party suppliers
– Shanghai Electric 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
– Shanghai Electric has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Shanghai Electric needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Easy access to finance
– Easy access to finance in Misc. Capital Goods industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Shanghai Electric can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents Shanghai Electric with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Capital Goods sector.
Stagnating economy with rate increase
– Shanghai Electric 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 Misc. Capital Goods industry.
Weighted SWOT Analysis of Shanghai Electric Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shanghai Electric 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 Shanghai Electric 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 Shanghai Electric 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 Shanghai Electric 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 Shanghai Electric needs to make to build a sustainable competitive advantage.