Swot Analysis Of Cummi In China

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1. Introduction
In this report, we will analyse the external and internal environments of China’s abrasives market. This report will further analyse how overlooking legal and socio-cultural forces in its macro environment and misaligning of its core competencies resulted in CUMI’s failure. Lastly, we will discuss why CUMI should have considered a differentiation business strategy instead.
2. External Environmental Analysis of the Abrasives Market in China

2.1 PESTLE Analysis
Over the years, the strengthened political relations between China and India have reflected in the boost in bilateral trade. Nevertheless, there are still strict legal regulations controlling foreign companies’ entry into China’s abrasives market. Hence, foreign companies …show more content…

Overall Analysis of CUMI’s Business Strategy into the Market in China
CUMI adopted a cost leadership business strategy during its initial venture into China.
While successfully leveraging on its Chinese partner to achieve cost benefits, it involved too many Indian employees in its operations which contradictorily resulted in high labour costs. The inconsistency along the value chain in procurement and human resource business functions respectively resulted in CUMI’s inability to be fully cost-effective. Coupled with strong competition from cost-effective Chinese manufacturing firms, CUMI’s business strategy failed.
In addition, CUMI failed to manage the external forces in the macro environment. Overlooking the importance in managing socio-cultural differences with its partner was detrimental. CUMI could have better persuaded its partner to focus on long-term profitability for the interests of both parties and their employees instead of focusing to be the biggest international company. The demerger caused CUMI to face many cost disadvantages as a foreign owned subsidiary in China due to legal regulations. In addition, it lost access to its partner’s raw …show more content…

Leveraging on its core competency of its partners’ combined resources, it could have used the synthetic diamond grits from Jingri Industrial Diamond company and manufacturing expertise of super abrasive grinding wheels and tools from Wendt India to produce high-end abrasives. As super abrasive is a more specialised product, the involvement of its skilled Indian employees would be more value-adding. Furthermore, CUMI could charge a higher price to offset higher labour cost. The high demand of super abrasives making up about one-third of the global market is highly

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