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 – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing energy prices, increasing household debt because of falling income levels, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies,
geopolitical disruptions, wage bills are increasing, 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.
Superior customer experience
– The customer experience strategy of Shanghai Electric in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Analytics focus
– Shanghai Electric 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 Misc. Capital Goods 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.
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.
Innovation driven organization
– Shanghai Electric is one of the most innovative firm in Misc. Capital Goods sector.
Effective Research and Development (R&D)
– Shanghai Electric has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Shanghai Electric staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For Shanghai Electric digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Shanghai Electric 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.
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.
Weaknesses of Shanghai Electric | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanghai Electric are -
Slow to strategic competitive environment developments
– As Shanghai Electric is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
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.
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.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of Shanghai Electric, it seems that company is thinking out the frontier risks that can impact Misc. Capital Goods 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Shanghai Electric, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. Shanghai Electric has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Shanghai Electric strategy
– From the outside it seems that the employees of Shanghai Electric 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.
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.
High cash cycle compare to competitors
Shanghai Electric has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Shanghai Electric Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shanghai Electric are -
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Shanghai Electric 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.
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.
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.
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.
Loyalty marketing
– Shanghai Electric 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.
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.
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.
Manufacturing automation
– Shanghai Electric can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods 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.
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. Shanghai Electric can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shanghai Electric 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 Shanghai Electric External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shanghai Electric are -
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.
Environmental challenges
– Shanghai Electric 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. Shanghai Electric can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Shanghai Electric 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 Shanghai Electric prominent markets.
Consumer confidence and its impact on Shanghai Electric 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 Misc. Capital Goods industry and other sectors.
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 Shanghai Electric business can come under increasing regulations regarding data privacy, data security, etc.
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.
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 Shanghai Electric in the Misc. Capital Goods sector and impact the bottomline of the organization.
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.
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.
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 Shanghai Electric.
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.
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.