Honghua Group Ltd (196) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Honghua Group Ltd (Hong Kong)
Based on various researches at Oak Spring University , Honghua Group Ltd is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing energy prices, increasing commodity prices, etc
Introduction to SWOT Analysis of Honghua Group Ltd
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Honghua Group Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Honghua Group Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Honghua Group Ltd 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 Honghua Group Ltd can be done for the following purposes –
1. Strategic planning of Honghua Group Ltd
2. Improving business portfolio management of Honghua Group Ltd
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Oil Well Services & Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Honghua Group Ltd
Strengths of Honghua Group Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Honghua Group Ltd are -
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Honghua Group Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Honghua Group Ltd 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.
Highly skilled collaborators
– Honghua Group Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil Well Services & Equipment industry. Secondly the value chain collaborators of Honghua Group Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Honghua Group Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Honghua Group Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Honghua Group Ltd 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 Oil Well Services & Equipment 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.
Ability to recruit top talent
– Honghua Group Ltd is one of the leading players in the Oil Well Services & Equipment industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Oil Well Services & Equipment
– Honghua Group Ltd is one of the leading players in the Oil Well Services & Equipment industry in Hong Kong. Over the years it has not only transformed the business landscape in the Oil Well Services & Equipment industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Honghua Group Ltd 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 Honghua Group Ltd 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.
Diverse revenue streams
– Honghua Group Ltd is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Honghua Group Ltd 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 Honghua Group Ltd in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Honghua Group Ltd has one of the best training and development program in Energy 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
– Honghua Group Ltd is one of the most innovative firm in Oil Well Services & Equipment sector.
Cross disciplinary teams
– Horizontal connected teams at the Honghua Group Ltd 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.
Weaknesses of Honghua Group Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honghua Group Ltd are -
Lack of clear differentiation of Honghua Group Ltd products
– To increase the profitability and margins on the products, Honghua Group Ltd 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 Honghua Group Ltd supply chain. Even after few cautionary changes, Honghua Group Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Honghua Group Ltd vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Honghua Group Ltd has a high cash cycle compare to other players in the Oil Well Services & Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Honghua Group Ltd is one of the leading players in the Oil Well Services & Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil Well Services & Equipment industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Honghua Group Ltd, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Honghua Group Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Honghua Group Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil Well Services & Equipment industry have deep experience in developing customer relationships. Marketing department at Honghua Group Ltd can leverage the sales team experience to cultivate customer relationships as Honghua Group Ltd is planning to shift buying processes online.
Need for greater diversity
– Honghua Group Ltd 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, Honghua Group Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Oil Well Services & Equipment industry over the last five years. Honghua Group Ltd 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.
Capital Spending Reduction
– Even during the low interest decade, Honghua Group Ltd 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 Oil Well Services & Equipment industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Honghua Group Ltd is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Honghua Group Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Honghua Group Ltd to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Honghua Group Ltd has high operating costs in the Oil Well Services & Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Honghua Group Ltd lucrative customers.
Honghua Group Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Honghua Group Ltd are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Honghua Group Ltd is facing challenges because of the dominance of functional experts in the organization. Honghua Group Ltd can utilize new technology in the field of Oil Well Services & Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Honghua Group Ltd 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.
Using analytics as competitive advantage
– Honghua Group Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil Well Services & Equipment sector. This continuous investment in analytics has enabled Honghua Group Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Honghua Group Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil Well Services & Equipment industry, but it has also influenced the consumer preferences. Honghua Group Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Honghua Group Ltd 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Honghua Group Ltd 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 Honghua Group Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Honghua Group Ltd can improve the customer journey of consumers in the Oil Well Services & Equipment 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Honghua Group Ltd can use these opportunities to build new business models that can help the communities that Honghua Group Ltd operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Honghua Group Ltd 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 Honghua Group Ltd to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Honghua Group Ltd 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.
Building a culture of innovation
– managers at Honghua Group Ltd 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 Oil Well Services & Equipment industry.
Leveraging digital technologies
– Honghua Group Ltd 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.
Better consumer reach
– The expansion of the 5G network will help Honghua Group Ltd to increase its market reach. Honghua Group Ltd 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.
Threats Honghua Group Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honghua Group Ltd are -
High dependence on third party suppliers
– Honghua Group Ltd 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Honghua Group Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil Well Services & Equipment sector.
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
– Honghua Group Ltd has witnessed rapid integration of technology during Covid-19 in the Oil Well Services & Equipment industry. As one of the leading players in the industry, Honghua Group Ltd needs to keep up with the evolution of technology in the Oil Well Services & Equipment 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.
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. Honghua Group Ltd needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Oil Well Services & Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Honghua Group Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Honghua Group Ltd 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 Oil Well Services & Equipment industry.
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 Honghua Group Ltd business can come under increasing regulations regarding data privacy, data security, etc.
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 Honghua Group Ltd in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Environmental challenges
– Honghua Group Ltd 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. Honghua Group Ltd can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Honghua Group Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Oil Well Services & Equipment sector.
Consumer confidence and its impact on Honghua Group Ltd 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 Oil Well Services & Equipment industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Honghua Group Ltd is facing in Oil Well Services & Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Honghua Group Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Honghua Group Ltd 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 Honghua Group Ltd 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 Honghua Group Ltd 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 Honghua Group Ltd 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 Honghua Group Ltd needs to make to build a sustainable competitive advantage.
