Midea Group SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Penetration in rural and urban areas: The penetration of home appliances in China, especially in rural and urban areas is very low. There is large growth potential in rural areas of China. As per a 2016 Credit Suisse survey in rural areas of China the penetration of AC, washing machine and refrigerator is only at 76%, 14%, and 11%, respectively. As the spending power of rural and urban population is increasing in China, there is room for penetration of home appliances. The demand for white goods is more in Urban areas. The rate of urbanization was 56% in 2015 and it’s expected to rise over the next decade till 2025.

2. A fast-growing sector of Kitchenware: The kitchenware segment has low penetration compared to white goods. In China, the penetration of kitchenware is low. According to a survey in 2015, the penetration of cooker goods and small kitchen appliances were 35% and 31.4% respectively while AC and Washing Machine penetration was 80-90%. Dishwashers and Ovens had a penetration of meagre 0.2 and 0.1% in China respectively, whereas in Germany it was 67.3/73.3% respectively and UK had 44.8/64.2% respectively. This shows the disparity between the usage of kitchen appliances in China and West world. The company has a huge potential in this segment. Lifestyle improvement and urbanization will be the driving force for this segment. The kitchenware sector is in a growing phase while the white goods sector has reached a mature phase.

3. Increase in adoption of robotics and industrial automation: World Health Organization has predicted that by 2050, 35% of Chinese population will be over 60 years of age. There will be shortage of labor and cost of labor will rise exponentially. To curb the labor intensive market, the robotics and automation will be the front runners. The automation and robotics will not only penetrate the industrial market but also be a predominant part of the household. The development in the household robotics and goods will be a major opportunity for Kuka, which is one of the leading companies in the robotics.

Threat

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Political

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Economic

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Social

1. Ageing Population in China which is major customer base: The two-child policy and aging problems can contribute to kitchenware sector growth. New born babies and the elderly need extra care and would require more in-home cooking which will see the growth in market. In some estimates, the two-child policy will bring additional 3-5 Mn babies from 2017 onwards with a population boost of 17-33%. The ageing population can have various implications both in positive and negative aspects. The ageing population increases the labor shortage which will result in the increase demand for the automation in the industry which may result in high production cost. But this can also be taken as opportunity as the elderly would require assistance and comfort from home appliances. The innovative advancement in home appliances is the forte for Midea.

2. Rising health cautiousness: According to a survey by BCG, Chinese have a very strong health awareness. 73% are willing to pay a premium for healthier products, which is 12% more than the global average. With increase in cautiousness, the kitchenware segment is flourishing with innovative products like blenders, juicers, oven etc. In 2015, 10.5% of total population was above 65 years old. In a few years the number is forecasted to be 13% at 180 million. Thus, the innovative and simple products in the kitchenware sector will be much needed in Chinese market.

Technological

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Legal

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Environmental

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