China Household (692) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

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

Based on various researches at Oak Spring University , China Household is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, talent flight as more people leaving formal jobs, wage bills are increasing, increasing energy prices, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of China Household

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

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

The strengths of China Household are -

Training and development

– China Household has one of the best training and development program in Consumer Cyclical 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.

Low bargaining power of suppliers

– Suppliers of China Household in the Consumer Cyclical sector have low bargaining power. China Household has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Household to manage not only supply disruptions but also source products at highly competitive prices.

Operational resilience

– The operational resilience strategy of China Household comprises – understanding the underlying the factors in the Furniture & Fixtures 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.

Superior customer experience

– The customer experience strategy of China Household in Furniture & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that China Household 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.

Cross disciplinary teams

– Horizontal connected teams at the China Household 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.

Effective Research and Development (R&D)

– China Household has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Household staying ahead in the Furniture & Fixtures industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High brand equity

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

Innovation driven organization

– China Household is one of the most innovative firm in Furniture & Fixtures sector.

Strong track record of project management in the Furniture & Fixtures industry

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

Digital Transformation in Furniture & Fixtures industry

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

Ability to lead change in Furniture & Fixtures

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

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

The weaknesses of China Household are -

High bargaining power of channel partners in Furniture & Fixtures industry

– because of the regulatory requirements in Hong Kong, China Household 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 Furniture & Fixtures industry.

High cash cycle compare to competitors

China Household has a high cash cycle compare to other players in the Furniture & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High operating costs

– Compare to the competitors, China Household has high operating costs in the Furniture & Fixtures industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract China Household lucrative customers.

Interest costs

– Compare to the competition, China Household 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.

Compensation and incentives

– The revenue per employee of China Household is just above the Furniture & Fixtures 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.

Ability to respond to the competition

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

Low market penetration in new markets

– Outside its home market of Hong Kong, China Household needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Lack of clear differentiation of China Household products

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

Increasing silos among functional specialists

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

Need for greater diversity

– China Household has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Slow decision making process

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

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

The opportunities of China Household are -

Developing new processes and practices

– China Household can develop new processes and procedures in Furniture & Fixtures 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.

Manufacturing automation

– China Household can use the latest technology developments to improve its manufacturing and designing process in Furniture & Fixtures 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.

Finding new ways to collaborate

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

Redefining models of collaboration and team work

– As explained in the weaknesses section, China Household is facing challenges because of the dominance of functional experts in the organization. China Household can utilize new technology in the field of Furniture & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Furniture & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Household 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 Household 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for China Household in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Furniture & Fixtures industry, and it will provide faster access to the consumers.

Creating value in data economy

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

Low interest rates

– Even though inflation is raising its head in most developed economies, China Household 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.

Better consumer reach

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

Harnessing reconfiguration of the global supply chains

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

Reforming the budgeting process

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

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

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

The threats of China Household are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for China Household in Furniture & Fixtures industry. The Furniture & Fixtures 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.

Regulatory challenges

– China Household 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 Furniture & Fixtures industry regulations.

Increasing wage structure of China Household

– 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 Household.

Consumer confidence and its impact on China Household 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 Furniture & Fixtures industry and other sectors.

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 Household in the Furniture & Fixtures sector and impact the bottomline of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, China Household may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Furniture & Fixtures 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. China Household needs to understand the core reasons impacting the Furniture & Fixtures industry. This will help it in building a better workplace.

High dependence on third party suppliers

– China Household 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.

Environmental challenges

– China Household 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 Household can take advantage of this fund but it will also bring new competitors in the Furniture & Fixtures industry.

Technology acceleration in Forth Industrial Revolution

– China Household has witnessed rapid integration of technology during Covid-19 in the Furniture & Fixtures industry. As one of the leading players in the industry, China Household needs to keep up with the evolution of technology in the Furniture & Fixtures 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Furniture & Fixtures industry are lowering. It can presents China Household with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Furniture & Fixtures sector.

Easy access to finance

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

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Weighted SWOT Analysis of China Household Template, Example

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

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