SWOT Analysis / TOWS Matrix for Hanhua Financial (Hong Kong)
Based on various researches at Oak Spring University , Hanhua Financial is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, central banks are concerned over increasing inflation,
cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hanhua Financial can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hanhua Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hanhua Financial 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 Hanhua Financial can be done for the following purposes –
1. Strategic planning of Hanhua Financial
2. Improving business portfolio management of Hanhua Financial
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hanhua Financial
Strengths of Hanhua Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hanhua Financial are -
Analytics focus
– Hanhua Financial 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 Consumer Financial Services 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.
Innovation driven organization
– Hanhua Financial is one of the most innovative firm in Consumer Financial Services sector.
Successful track record of launching new products
– Hanhua Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hanhua Financial 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.
Strong track record of project management in the Consumer Financial Services industry
– Hanhua Financial is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Consumer Financial Services industry
– Hanhua Financial has clearly differentiated products in the market place. This has enabled Hanhua Financial to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Hanhua Financial to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Hanhua Financial is one of the leading players in the Consumer Financial Services 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.
Cross disciplinary teams
– Horizontal connected teams at the Hanhua Financial 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 brand equity
– Hanhua Financial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hanhua Financial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Hanhua Financial has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hanhua Financial staying ahead in the Consumer Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Hanhua Financial is present in almost all the verticals within the Consumer Financial Services industry. This has provided Hanhua Financial a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of Hanhua Financial comprises – understanding the underlying the factors in the Consumer Financial Services 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.
Training and development
– Hanhua Financial has one of the best training and development program in Financial 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.
Weaknesses of Hanhua Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hanhua Financial are -
Products dominated business model
– Even though Hanhua Financial has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hanhua Financial should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at Hanhua Financial, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Hanhua Financial 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, Hanhua Financial needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Hanhua Financial strategy
– From the outside it seems that the employees of Hanhua Financial 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.
Slow to strategic competitive environment developments
– As Hanhua Financial is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
Interest costs
– Compare to the competition, Hanhua Financial 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 Hanhua Financial is just above the Consumer Financial Services 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.
High operating costs
– Compare to the competitors, Hanhua Financial has high operating costs in the Consumer Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hanhua Financial lucrative customers.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in Hong Kong, Hanhua Financial 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 Consumer Financial Services industry.
Increasing silos among functional specialists
– The organizational structure of Hanhua Financial is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Hanhua Financial needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hanhua Financial to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Hanhua Financial needs to have more collaboration between its sales team and marketing team. Sales professionals in the Consumer Financial Services industry have deep experience in developing customer relationships. Marketing department at Hanhua Financial can leverage the sales team experience to cultivate customer relationships as Hanhua Financial is planning to shift buying processes online.
Hanhua Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hanhua Financial are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Consumer Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hanhua Financial 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. Hanhua Financial 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hanhua Financial 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Consumer Financial Services industry, but it has also influenced the consumer preferences. Hanhua Financial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hanhua Financial in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Hanhua Financial 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.
Use of Bitcoin and other crypto currencies for transactions in Consumer Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hanhua Financial in the Consumer Financial Services industry. Now Hanhua Financial can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Hanhua Financial can improve the customer journey of consumers in the Consumer Financial Services 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.
Creating value in data economy
– The success of analytics program of Hanhua Financial has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help Hanhua Financial to build a more holistic ecosystem for Hanhua Financial products in the Consumer Financial Services 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 Hanhua Financial 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.
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. Hanhua Financial can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hanhua Financial 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 Hanhua Financial to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Hanhua Financial can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial Services 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hanhua Financial can use these opportunities to build new business models that can help the communities that Hanhua Financial operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Threats Hanhua Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hanhua Financial are -
High dependence on third party suppliers
– Hanhua Financial 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 Consumer Financial Services industry are lowering. It can presents Hanhua Financial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Consumer Financial Services sector.
Technology acceleration in Forth Industrial Revolution
– Hanhua Financial has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Hanhua Financial needs to keep up with the evolution of technology in the Consumer Financial Services 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.
Consumer confidence and its impact on Hanhua Financial 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 Consumer Financial Services industry and other sectors.
Environmental challenges
– Hanhua Financial 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. Hanhua Financial can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hanhua Financial in Consumer Financial Services industry. The Consumer Financial Services 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hanhua Financial 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 Hanhua Financial prominent markets.
Increasing wage structure of Hanhua Financial
– 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 Hanhua Financial.
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 Hanhua Financial in the Consumer Financial Services sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Hanhua Financial is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Hanhua Financial 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 Consumer Financial Services industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hanhua Financial may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Consumer Financial Services sector.
Weighted SWOT Analysis of Hanhua Financial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hanhua Financial 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 Hanhua Financial 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 Hanhua Financial 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 Hanhua Financial 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 Hanhua Financial needs to make to build a sustainable competitive advantage.
