SWOT Analysis / TOWS Matrix for Lianhua Supermarket (Hong Kong)
Based on various researches at Oak Spring University , Lianhua Supermarket is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , there is backlash against globalization, etc
Introduction to SWOT Analysis of Lianhua Supermarket
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lianhua Supermarket can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lianhua Supermarket, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lianhua Supermarket 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 Lianhua Supermarket can be done for the following purposes –
1. Strategic planning of Lianhua Supermarket
2. Improving business portfolio management of Lianhua Supermarket
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lianhua Supermarket
Strengths of Lianhua Supermarket | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lianhua Supermarket are -
Superior customer experience
– The customer experience strategy of Lianhua Supermarket in Retail (Grocery) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Lianhua Supermarket has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lianhua Supermarket 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.
Analytics focus
– Lianhua Supermarket is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Grocery) 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.
Diverse revenue streams
– Lianhua Supermarket is present in almost all the verticals within the Retail (Grocery) industry. This has provided Lianhua Supermarket 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.
Innovation driven organization
– Lianhua Supermarket is one of the most innovative firm in Retail (Grocery) sector.
High brand equity
– Lianhua Supermarket has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lianhua Supermarket to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Lianhua Supermarket
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lianhua Supermarket does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Lianhua Supermarket 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.
Strong track record of project management in the Retail (Grocery) industry
– Lianhua Supermarket is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Lianhua Supermarket has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Lianhua Supermarket have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Lianhua Supermarket is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lianhua Supermarket is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lianhua Supermarket emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Lianhua Supermarket has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lianhua Supermarket staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Lianhua Supermarket | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lianhua Supermarket are -
Interest costs
– Compare to the competition, Lianhua Supermarket 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.
Ability to respond to the competition
– As the decision making is very deliberative at Lianhua Supermarket, in the dynamic environment of Retail (Grocery) industry it has struggled to respond to the nimble upstart competition. Lianhua Supermarket has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Lianhua Supermarket is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Lianhua Supermarket needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lianhua Supermarket to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.
High dependence on Lianhua Supermarket ‘s star products
– The top 2 products and services of Lianhua Supermarket still accounts for major business revenue. This dependence on star products in Retail (Grocery) industry has resulted into insufficient focus on developing new products, even though Lianhua Supermarket has relatively successful track record of launching new products.
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 Lianhua Supermarket supply chain. Even after few cautionary changes, Lianhua Supermarket is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lianhua Supermarket vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Lianhua Supermarket has a high cash cycle compare to other players in the Retail (Grocery) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Lianhua Supermarket has some of the most successful models in the Retail (Grocery) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lianhua Supermarket should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Lianhua Supermarket is just above the Retail (Grocery) 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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Grocery) industry, Lianhua Supermarket needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lianhua Supermarket is slow explore the new channels of communication. These new channels of communication can help Lianhua Supermarket to provide better information regarding Retail (Grocery) products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Hong Kong, Lianhua Supermarket needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lianhua Supermarket Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lianhua Supermarket are -
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. Lianhua Supermarket can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lianhua Supermarket 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 Lianhua Supermarket to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lianhua Supermarket in the Retail (Grocery) industry. Now Lianhua Supermarket can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Lianhua Supermarket can use the latest technology developments to improve its manufacturing and designing process in Retail (Grocery) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lianhua Supermarket in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Grocery) industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Lianhua Supermarket has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Grocery) sector. This continuous investment in analytics has enabled Lianhua Supermarket to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lianhua Supermarket to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Lianhua Supermarket 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.
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 Lianhua Supermarket 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lianhua Supermarket 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. Lianhua Supermarket 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, Lianhua Supermarket can use these opportunities to build new business models that can help the communities that Lianhua Supermarket operates in. Secondly it can use opportunities from government spending in Retail (Grocery) sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lianhua Supermarket 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 Lianhua Supermarket can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Grocery) industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lianhua Supermarket is facing challenges because of the dominance of functional experts in the organization. Lianhua Supermarket can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Lianhua Supermarket External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lianhua Supermarket are -
Environmental challenges
– Lianhua Supermarket 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. Lianhua Supermarket can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.
Regulatory challenges
– Lianhua Supermarket 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 Retail (Grocery) industry regulations.
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.
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 Lianhua Supermarket.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Lianhua Supermarket with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) 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. Lianhua Supermarket needs to understand the core reasons impacting the Retail (Grocery) industry. This will help it in building a better workplace.
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 Lianhua Supermarket business can come under increasing regulations regarding data privacy, data security, 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lianhua Supermarket may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Grocery) sector.
Stagnating economy with rate increase
– Lianhua Supermarket 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 Retail (Grocery) industry.
Consumer confidence and its impact on Lianhua Supermarket 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 Retail (Grocery) industry and other sectors.
High dependence on third party suppliers
– Lianhua Supermarket 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.
Shortening product life cycle
– it is one of the major threat that Lianhua Supermarket is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Lianhua Supermarket Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lianhua Supermarket 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 Lianhua Supermarket 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 Lianhua Supermarket 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 Lianhua Supermarket 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 Lianhua Supermarket needs to make to build a sustainable competitive advantage.