Zhongsheng (881) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Zhongsheng (Hong Kong)

Based on various researches at Oak Spring University , Zhongsheng is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is increasing trade war between United States & China, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Zhongsheng

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

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

The strengths of Zhongsheng are -

Strong track record of project management in the Retail (Specialty) industry

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

Operational resilience

– The operational resilience strategy of Zhongsheng comprises – understanding the underlying the factors in the Retail (Specialty) 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.

Digital Transformation in Retail (Specialty) industry

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

– Zhongsheng has one of the best training and development program in Services 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

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

Highly skilled collaborators

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

Sustainable margins compare to other players in Retail (Specialty) industry

– Zhongsheng has clearly differentiated products in the market place. This has enabled Zhongsheng to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped Zhongsheng to invest into research and development (R&D) and innovation.

Ability to lead change in Retail (Specialty)

– Zhongsheng is one of the leading players in the Retail (Specialty) industry in Hong Kong. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Zhongsheng in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the Zhongsheng 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.

High switching costs

– The high switching costs that Zhongsheng 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.

Learning organization

- Zhongsheng is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Zhongsheng is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Zhongsheng emphasize – knowledge, initiative, and innovation.

Analytics focus

– Zhongsheng 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 Retail (Specialty) 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.

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

The weaknesses of Zhongsheng are -

Workers concerns about automation

– As automation is fast increasing in the Retail (Specialty) industry, Zhongsheng 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 Zhongsheng needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Specialty) industry have deep experience in developing customer relationships. Marketing department at Zhongsheng can leverage the sales team experience to cultivate customer relationships as Zhongsheng is planning to shift buying processes online.

High dependence on Zhongsheng ‘s star products

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

Increasing silos among functional specialists

– The organizational structure of Zhongsheng is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but Zhongsheng needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zhongsheng to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.

Products dominated business model

– Even though Zhongsheng has some of the most successful models in the Retail (Specialty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Zhongsheng should strive to include more intangible value offerings along with its core products and services.

Capital Spending Reduction

– Even during the low interest decade, Zhongsheng 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 Retail (Specialty) industry using digital technology.

Interest costs

– Compare to the competition, Zhongsheng 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.

Lack of clear differentiation of Zhongsheng products

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

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

High operating costs

– Compare to the competitors, Zhongsheng has high operating costs in the Retail (Specialty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Zhongsheng lucrative customers.

High bargaining power of channel partners in Retail (Specialty) industry

– because of the regulatory requirements in Hong Kong, Zhongsheng 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 Retail (Specialty) industry.

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

The opportunities of Zhongsheng are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zhongsheng 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. Zhongsheng 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

– Zhongsheng 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

– Zhongsheng can improve the customer journey of consumers in the Retail (Specialty) 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.

Building a culture of innovation

– managers at Zhongsheng can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Specialty) industry.

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. Zhongsheng can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Zhongsheng 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.

Finding new ways to collaborate

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

Reforming the budgeting process

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

Using analytics as competitive advantage

– Zhongsheng has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled Zhongsheng to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zhongsheng to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Better consumer reach

– The expansion of the 5G network will help Zhongsheng to increase its market reach. Zhongsheng 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.

Loyalty marketing

– Zhongsheng 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, Zhongsheng is facing challenges because of the dominance of functional experts in the organization. Zhongsheng can utilize new technology in the field of Retail (Specialty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Manufacturing automation

– Zhongsheng can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) 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.

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

The threats of Zhongsheng are -

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 Zhongsheng.

Easy access to finance

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

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.

Technology acceleration in Forth Industrial Revolution

– Zhongsheng has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, Zhongsheng needs to keep up with the evolution of technology in the Retail (Specialty) 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.

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 Zhongsheng in the Retail (Specialty) sector and impact the bottomline 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. Zhongsheng needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.

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. Zhongsheng 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.

Shortening product life cycle

– it is one of the major threat that Zhongsheng is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Zhongsheng in Retail (Specialty) industry. The Retail (Specialty) 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.

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.

Increasing wage structure of Zhongsheng

– 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 Zhongsheng.

Barriers of entry lowering

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

Learning curve for new practices

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

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Weighted SWOT Analysis of Zhongsheng Template, Example

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

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