China Shengmu Organic Milk (1432) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for China Shengmu Organic Milk (Hong Kong)

Based on various researches at Oak Spring University , China Shengmu Organic Milk is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing household debt because of falling income levels, technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing energy prices, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of China Shengmu Organic Milk

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

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

The strengths of China Shengmu Organic Milk are -

Ability to recruit top talent

– China Shengmu Organic Milk is one of the leading players in the Food Processing 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.

Low bargaining power of suppliers

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

Organizational Resilience of China Shengmu Organic Milk

– The covid-19 pandemic has put organizational resilience at the centre of everthing China Shengmu Organic Milk does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Effective Research and Development (R&D)

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

Innovation driven organization

– China Shengmu Organic Milk is one of the most innovative firm in Food Processing sector.

Sustainable margins compare to other players in Food Processing industry

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

High switching costs

– The high switching costs that China Shengmu Organic Milk 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.

High brand equity

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

Highly skilled collaborators

– China Shengmu Organic Milk has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of China Shengmu Organic Milk have helped the firm to develop new products and bring them quickly to the marketplace.

Superior customer experience

– The customer experience strategy of China Shengmu Organic Milk in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Ability to lead change in Food Processing

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

Diverse revenue streams

– China Shengmu Organic Milk is present in almost all the verticals within the Food Processing industry. This has provided China Shengmu Organic Milk 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.

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

The weaknesses of China Shengmu Organic Milk are -

Need for greater diversity

– China Shengmu Organic Milk 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.

Ability to respond to the competition

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

Products dominated business model

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

Interest costs

– Compare to the competition, China Shengmu Organic Milk 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.

Slow to strategic competitive environment developments

– As China Shengmu Organic Milk is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.

Slow decision making process

– As mentioned earlier in the report, China Shengmu Organic Milk has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. China Shengmu Organic Milk 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.

High operating costs

– Compare to the competitors, China Shengmu Organic Milk has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract China Shengmu Organic Milk lucrative customers.

High cash cycle compare to competitors

China Shengmu Organic Milk has a high cash cycle compare to other players in the Food Processing 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 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 China Shengmu Organic Milk supply chain. Even after few cautionary changes, China Shengmu Organic Milk is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Shengmu Organic Milk vulnerable to further global disruptions in South East Asia.

Compensation and incentives

– The revenue per employee of China Shengmu Organic Milk is just above the Food Processing 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.

Capital Spending Reduction

– Even during the low interest decade, China Shengmu Organic Milk 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 Food Processing industry using digital technology.

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

The opportunities of China Shengmu Organic Milk are -

Building a culture of innovation

– managers at China Shengmu Organic Milk 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 Food Processing industry.

Better consumer reach

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

Finding new ways to collaborate

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

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Shengmu Organic Milk 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 China Shengmu Organic Milk to hire the very best people irrespective of their geographical location.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Shengmu Organic Milk 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 Shengmu Organic Milk 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China Shengmu Organic Milk can use these opportunities to build new business models that can help the communities that China Shengmu Organic Milk operates in. Secondly it can use opportunities from government spending in Food Processing sector.

Leveraging digital technologies

– China Shengmu Organic Milk 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, China Shengmu Organic Milk 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 Shengmu Organic Milk 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

– China Shengmu Organic Milk can improve the customer journey of consumers in the Food Processing 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects China Shengmu Organic Milk 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 Shengmu Organic Milk has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled China Shengmu Organic Milk to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Shengmu Organic Milk to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Lowering marketing communication costs

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

Low interest rates

– Even though inflation is raising its head in most developed economies, China Shengmu Organic Milk 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.

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Threats China Shengmu Organic Milk External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of China Shengmu Organic Milk are -

Barriers of entry lowering

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

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. China Shengmu Organic Milk 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, China Shengmu Organic Milk 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 China Shengmu Organic Milk prominent markets.

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 Shengmu Organic Milk needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, China Shengmu Organic Milk may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Food Processing sector.

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 China Shengmu Organic Milk.

Shortening product life cycle

– it is one of the major threat that China Shengmu Organic Milk is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

High dependence on third party suppliers

– China Shengmu Organic Milk 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.

Regulatory challenges

– China Shengmu Organic Milk 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 Food Processing industry regulations.

Environmental challenges

– China Shengmu Organic Milk 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 Shengmu Organic Milk can take advantage of this fund but it will also bring new competitors in the Food Processing industry.

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 Shengmu Organic Milk in the Food Processing sector and impact the bottomline of the organization.

Increasing wage structure of China Shengmu Organic Milk

– 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 Shengmu Organic Milk.

Stagnating economy with rate increase

– China Shengmu Organic Milk 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 Food Processing industry.

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Weighted SWOT Analysis of China Shengmu Organic Milk Template, Example

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

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