Smart and Sustainable Management of Shoe Machinery Companies in Taiwan during the COVID-19 Pandemic—Case Studies of the Tung Sheng Company and Strong Basic Enterprise Limited Company

Abstract

This case report combined PEST, SWOT, a business model canvas, and knowledge management to develop a theoretical framework for assessing business models, and smart and sustainable management of two case study companies—Tung Sheng and Strong Basic—in Taiwan during the COVID-19 pandemic. A case study and heuristic inquiry research design was adopted. Secondary data and interviews with top managers were used to triangulate within the same cases. The results show that the case study companies owned capabilities in R&D as a foundation to further apply new smart ICT (information and communication technology) and execute green manufacturing. Strong key partnerships were useful resources to diversify business investment, although current qualified employees were not sufficient. Resilient practices included adopting new and green technology to mitigate the negative impacts of the COVID-19 pandemic. This study establishes a useful framework for case study research and provides practical information about business models, and smart and sustainable management in two case studies.

1. Introduction

This study used PEST (political, economic, social-cultural, and technological) external environment analysis, SWOT (strength, weakness, opportunity, threat) analysis, and business models to examine the current operating conditions of two related case companies: Tung Sheng Company and Strong Basic Enterprise Limited Company. A research framework was created by combining PEST, SWOT, and the concepts of knowledge management, along with the tool of a business model canvas to examine the business status of the two case study companies, and to explore the potential application of smart and sustainable management during the COVID-19 pandemic in Taiwan (Figure 1). This framework provides a comprehensive perspective to analyze internal capabilities and the external environment for these two case study companies. This study contributes to increasing the resilience and sustainability of a company’s operation during the COVID-19 pandemic.

1.1. PEST and SWOT

The PEST analysis tool was introduced to scan the business environment [1], including four environmental factors faced by enterprises: economics, technology, politics, and social culture. Through the examination of possible impacts of the four external macro-environments, companies can effectively understand their market situation and plan the future direction of operations. Based on their needs and characteristics, such as strengths (S) and weaknesses (W), companies can use the PEST analysis method to discuss the overall environment in detail and learn about the opportunities (O) and threats (T) that external environmental factors bring to a company.

During the worldwide COVID-19 pandemic, since 8 December 2019, when several cases caused by a COVID-19 variant were identified in China [2], the impact of COVID-19 was serious during 2020 and 2021, until now, 2022. On 19 May 2021, Taiwan’s Central Epidemic Command Center raised the COVID-19 alert to Level 3 for the whole island [3]. This alert imposed a series of strict prohibitions on gatherings [3] and formed a major threat to some business operations. According to a two-by-two matrix of SWOT analyses, a company should use its strengths to reduce its vulnerability to the threat, and prevent its weaknesses to avoid making the company susceptible to the threat [4].

The COVID-19 pandemic threat might increase some disruption risks in demand, process, supply, and other areas of operations. Prior research has suggested that innovation is one of the capabilities contributing to a company’s resilience [5]. That is, when a firm assigns enough resources to innovation, the firm is able to adapt to rapid changes, respond to an environmental threat, and proactively manage some disruption risks [5].

Given the development of artificial intelligence (AI), the Internet of Things (IoT), and the fifth generation (5G) of wireless technology, it seems an opportunity exists to benefit firms that initiate innovation associated with these types of smart information technology. During the COVID-19 pandemic, smart management might work well to help increase a firm’s resilience, when considered in relation to knowledge management and business models. According to a two-by-two matrix of SWOT analyses, a company should match its strengths with the opportunity to take advantage and overcome its weaknesses to attain the opportunity [4].

1.2. Knowledge Management and Business Model Innovation

In today’s information and knowledge-based business environment, a firm’s knowledge management (KM) is defined as capabilities to continuously learn and leverage knowledge and convert that knowledge for new value proposition, creation, and capture in business model innovation [6]. Two streams of KM include internal and external knowledge management capabilities. The internal KM capabilities focus on maintaining and exploiting existing knowledge [6] to become a basis for further research and development (R&D) and a driver of the innovation process, whereas the external KM capabilities emphasize a firm’s ability to grasp knowledge arising from sources outside a firm’s boundary, identify new trends, and convert and apply that knowledge [6] into an effective business model.

Business models are conceptualized as an architecture of elements in value proposition, creation, and capture [6], and operationalized as a canvas with nine building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure (Figure 2) [7]. New developments of information and communication technology have led to innovations in these elements and build new and updated blocks of a business model. PEST and SWOT analyses are performed for the current environment and each building block of a business model canvas to reveal constructive questions about the existing business models and to re-interpret strategy [8].

1.3. Smart Management

Smart management in this study mainly refers to a digital transformation of a company in which managers apply new smart information and communication technologies in smart manufacturing, smart factories, and smart logistics, along with suitable business and management models [9]. A new generation of information and communication technologies may include: the Internet of Things (IoT), cloud computing, big data, mobile Internet, the fifth generation (5G) wireless systems, artificial intelligence, robots, unmanned vehicles, block-chain technology, virtual reality (VR), and cyber-physical systems [9,10]. The tool of the business model canvas is adopted to help examine the application of smart management in two case studies during the COVID-19 pandemic in Taiwan.

1.4. Sustainable Management

A concern for businesses is the increasing pressures on global resources. To achieve responsible consumption and production, it is important to encourage industries, businesses, and consumers to recycle and reduce waste [11]. Instead of linear economies, which have excessive material consumption and eject large proportions of the material as waste, much more circular economies can be made to achieve more using less [12] toward a more resource-efficient economy. Sustainable development, for business enterprises, means adopting business strategies and activities that meet the purpose and objectives of the enterprise and its stakeholders today, while aligning those with outside goals, such as the sustainable development goals in protecting, sustaining, and enhancing the human and natural resources that will be needed in the future [13,14].

Sustainable development in business has the ability to increase customer loyalty to the brand and maintain competitiveness [15,16]. In detail, enterprises pay more attention and respect to environmental and social factors to help themselves improve the brand′s reputation and increase trust with partners, as well as the social community. Thereby, businesses have more opportunities to attract capital and human resources to expand their business, improve profits, and contribute to the green economy.

Sustainable development helps to effectively exploit resources, improve productivity, and reduce costs [17,18]. Enterprises pursuing sustainable development goals always have specific strategies and plans from the input, using resources, conserving resources, saving costs for inputs such as raw materials, electricity, and water, etc., overcoming systemic problems, purchasing renewable energy, saving energy, reducing carbon emissions, and recycling waste, while improving the quality of the working environment, as well as employee productivity.

Sustainable development promotes corporate social responsibility (CSR) with environmental and social issues [19]. Businesses pursuing a sustainable business model actively pay attention to the laws and policies of enterprises when implementing social responsibility for environmental protection. In particular, businesses need to pay attention to product output to ensure quality and waste treatment processes in accordance with prescribed standards.

Sustainable management in this study mainly refers to the achievement of a circular economy with new forms of business models and invention, as well as innovation, in the shoe machinery industry. One of the major focuses is the management of waste materials to recover valuable resources, such as filler materials, by an innovative recycling machinery system in the next cycle. The innovation basically applies the techno-sphere to the circular economy to keep down waste contamination and continue recycling materials as much as possible [20].

1.5. Smart Management and Sustainable Management

It is evident that there is a significant relationship between smart management and sustainable management. During the COVID-19 pandemic, businesses have to face several challenging economic crises due to volatility, uncertainty, complexity, and ambiguity. In order to combat this issue, enterprises who opt for implementing sustainable smart working management with the support of the IoT and smart technologies could gain economic sustainability [21].

Sustainable technology in management is a term that means innovative and creative production processes that consider environmental resources and promote social and economic development. One significant goal of sustainable technology in management is to lower environmental risks, to produce sustainable products through a green manufacturing process, and to provide sustainable products to consumers. By doing so, businesses can be involved in a socially responsible business and their consumers can use products made from a socially responsible business. Therefore, consumers can believe that they are consuming the right products for societal well-being and at the same time also keep their satisfaction high. Both businesses and consumers can recognize good work and they expect to develop a long-term relationship as a producer and consumer [22].

2. Practical Case Studies

2.1. Tung Sheng Company Limited

The first case study company in this study is Tung Sheng Company Limited, founded in 1965 in the Feng Yuan district, Taichung, Taiwan, specializing in rubber and vulcanized footwear-manufacturing machines [23]. This company has developed a series of relevant machines for making vulcanized shoes, manufactured automation equipment, and helped firms establish their own shoe factories in developing (or developed) countries, such as Tunisia, Indonesia, Ethiopia, Argentina, Cambodia, Vietnam, Mexico, Ecuador, Turkey, Mainland China, and more. Tung Sheng Company offers three major services: a whole plant making shoe equipment and production technology, rubber and EVA machines, and an after-sales service [24]. Additionally, Tung Sheng Company also designs and provides autoclaves. Tung Sheng is the leading machinery manufacturer in Taiwan for making vulcanized shoes and it is appointed by many popular shoe brands, such as Nike, Adidas, Converse, Vans, Fila, Reebok, and Asics, to name a few [24].

Sustainability in Tung Sheng is demonstrated in two aspects, with an emphasis on responsible production. First, the company promotes the circular economy, to recycle, reuse, and renew materials. In 2015, this company developed a fully automatic rubber and EVA-recycling pulverizing system and assisted factories in reducing wastes and saving production costs, endeavoring to protect the environment. Second, green innovation is executed in machinery design. For example, the refrigerating-type rubber sheet cooling machine uses automatic feeding to improve efficiency and adopts green design without water pollution [24]. Currently, the case study company tries to be a pioneer as a total solution provider of whole-plant equipment and environment-friendly technology for helping factories make vulcanized shoes and recycle rubber.

2.2. Strong Basic Enterprise Limited

The other case study company, Strong Basic Enterprise Limited, was established in 1992 and is closely associated with Tung Sheng Company as a subsidiary for the purpose of providing a complete and comprehensive service, including plans for customers to design production equipment and set up local plants, an after-sales service, and follow-up maintenance [23,25]. The major purpose of this company is to integrate turnkey equipment, shoe-making technology, and an after-sales service network [26]. The company has worked for more than 125 factories across nearly 30 countries around the world.

The case study company aligned with other related machine makers to create a group providing consultancy, production technology, and whole-plant equipment, and initiated co-development in certified equipment and automation systems [26]. The company is actively diversifying its business scope, seeking cooperation partners in upstream and downstream firms and other related fields and brands for investment and strategic alliances. For example, the company invested in a Hong Kong department store selling footwear products and has also cooperated with a Japanese company to produce a limited number of Hello Kitty canvas shoes [27].

3. Research Methods

3.1. Research Design

This study adopted the case study research method, an empirical inquiry that investigates the individual, such as organization, group, and industry, within its real context [28,29]. Two practical case studies were included, also in addition to a heuristic inquiry research design [30]. The president of the major case study company, Tung Sheng Company Limited, initiated this research project as the leading author. This helps data collection, analysis, and interpretation, with the advantage of persistent and deep observation, as well as being able to acquire direct information, along with other secondary data. This enhances the insights into the development of the research framework and in the discussion of the results and ensures the credibility of the study.

3.2. Data Collection

The research framework (Figure 1) is used as a guiding measure to assess the case study companies’ business and management. In addition to existing internal documents from the two case study companies for data collection, major top managers were interviewed. Multiple sources of data collection were used to “triangulate” (i.e., confirm and deepen understanding) within the same case study [29]. The interview outline included the following questions:

• How do you SWOT analyze the current PEST environment and adjust your business model?
• By using the business model canvas and your knowledge management, how do you respond to the new generation of information and communication technologies as an opportunity to leverage your strengths and weaknesses for innovation in smart management?
• During the COVID-19 pandemic in Taiwan, how do you respond to this threat effectively?
• How do your responses to new smart information and communication technologies help you face the threat of the COVID-19 pandemic?
• During the COVID-19 pandemic, what are your vision and practices related to sustainability goals in potential combination with the application of smart technology?

4. Results and Discussion

4.1. Two-by-Two Matrix of SWOT Analysis in Combination with PEST

Thanks to the rapid development of technology, it becomes more feasible than before for manufacturers to establish an automated production line, which can save labor, reduce production times and cost, and cope with a large volume of orders. Additionally, with the trend of leisure sports receiving more attention, the sport shoe market is expanding, and this increases demand for shoe-making machinery and equipment for shoe factories. The brand strength of the case study companies helps share the expanding market, and the capabilities of their R&D assist in developing updated and customized production equipment and services to meet diverse customer requirements and needs.

The application of new information and communication technology (ICT) effectively promotes cooperation with many partners and integration of resources and cultivates an ability to export complete equipment for an entire plant in many countries around the world. A few examples of partners listed on Taiwan’s stock market include Pou Chen Group, the world’s largest shoe manufacturer, Feng Tay Group, the largest manufacturer of Nike sports shoes, and Fulgent Sun Group. This cooperation and integration also extends investment in vertical firms, rubber-related industries, and other brands, to leverage on limited resources of insufficient qualified employees.

Major revenue of the case study companies in Taiwan came from exporting machines and equipment to other countries. However, Taiwan was unable to become a member of all regional economic and trade organizations and was unable to obtain preferential treatment among members of regional organizations. This became detrimental to Taiwan’s case study companies in regard to international competition. Strategic alliances in global outsourcing and the establishment of foreign branches and factories are used to export products from other countries with lower tariffs than Taiwan. This also expands markets and increases competitiveness with the lower export and labor costs in other countries, particularly when the labor policy of “one fixed and one flexible day off per week” (that is, five working days per week) imposed in 2017 has increased enterprises’ labor costs in Taiwan (

Table 1. Two-by-two matrix of SWOT analysis in Combination with PEST.

	Strength	Weakness
O	Rapid development of technology helps establish an automated production line. The brand strength helps share the expanding market in sport shoes. The capabilities in R&D assist in the development of customized production equipment to meet diverse customer requirements and needs.	An automated production line helps overcome the difficulty in the absence of qualified workers. Application of new information and communication technology cultivates an ability to export complete equipment for an entire plant. Application of ICT extends investment in vertical firms, rubber-related industries, and other brands, to leverage on limited resources of insufficient employees.
T	Strategic alliances in global outsourcing and establishment of foreign branches and factories are used to export products from other countries with lower tariffs. Apply artificial intelligence of things (AIoT) to develop customized machinery. An ability in AIoT integration helps customers set up a smart factory. This is difficult to be imitated. It seems that the COVID-19 threat inspires development of automated and intelligent machines. Case study companies use AIoT to continue their services online.	The labor policy of “one fixed and one flexible day off per week” was imposed in 2017 in Taiwan. Strategic alliances in global outsourcing and establishment of foreign branches and factories decrease labor costs and export costs. The COVID-19 impact is serious because people cannot work or are forced to work from home and attend online meetings with clients. During the COVID-19 pandemic, revenue fell dramatically due to cost increases, raw material shortages, and postponed orders.

Notes: O means opportunity, whereas T means threat.

).

Suspected counterfeit products are another threat that cause a decrease in sales and revenue. Strategies to overcome the threat are to apply artificial intelligence of things (AIoT) and other information technology for continuous development of customized machinery. Using an ability in AIoT integration, the case study companies can help customers set up an entire plant and build a smart factory. The case study companies also used AIoT to continue their services online when COVID-19 was serious. Such applications of new technology are difficult to imitate.

During the worldwide COVID-19 pandemic, from the end of 2019 through 2020 and 2021, the impact was serious. Revenue and profit fell dramatically because people could not work, shipping costs increased, causing raw material shortages, and orders for new machinery and plants were postponed. Employees were forced to work from home, attend online meetings with clients, and use AIoT monitoring to carry out preventive maintenance of production machinery. The COVID-19 threat seems to have inspired development of automated and intelligent machines (Table 1). It is important for business sustainability managers to better understand the implications of COVID-19 on business, by taking a systems perspective [31,32], and to address innovative manufacturing, and resource and waste management [33].

4.2. Analysis of Business Model Canvas and Innovation

• Customer segments include firms that produce shoes for sport brands and manufacturers that make rubber products for automobile industries.
• Value propositions are to keep being a pioneer as a total solution provider for the establishment of an entire plant, after-sales service, and follow-up maintenance.
• Channels include international exhibitions, participation in local shoe-making associations and trade organizations, and online platforms for instant communication. PEST and SWOT analysis suggests extending participation in African economic and trade networks and exhibitions, and to convert ICT applications into connection with customers and partners.
• Customer relationships are primarily based on customized machinery and service, as well as cross-investment to build up trust.
• Revenue streams are mostly from machinery product sales, the total solution for the establishment of a whole plant, commissions of introducing and transferring orders, and cross-shareholding investment.
• Key resources include capabilities in R&D, many granted patents for innovative machines, and development of diversified machinery products and an automatic rubber-recycling system.
• Key activities include participation in international exhibitions and exposure to governmental trade units, relevant associations and organizations, in order to reach more potential customers. It might be worthwhile to invite customers to visit the case study companies or to apply VR and 5G for virtual experiences in understanding the products.
• Key partnerships include upstream suppliers for materials and semi-finished products, strategic partners, outsourcing firms, and customers. For diversifying their business scope and partnerships, the case study companies invested in a department store in Hong Kong, cooperate with shoes brands in Japan, and keep looking for other potential investment opportunities.
• Cost structure consists of expenses from materials, production, logistics, R&D, and marketing, manufacturing overhead and administration costs, employee salaries, and equipment depreciation.

4.3. Smart Knowledge Management

In the process of knowledge management to identify, acquire, use, and share new knowledge about smart information technology, the case study companies first became a member of the Taiwan Footwear Industry Association and used this platform to interact with other firms in the same industry; and second, they attended workshops and seminars held by the Industrial Technology Research Institute [34] to learn new information and knowledge about the smart technology. This further initiated research projects executed by R&D with a Gantt chart, checking points, and records for knowledge storage and subsequent sharing. Current technical gaps push some R&D research projects forward, while other projects are carried out to satisfy customers’ needs. Examples may include innovative and automatic machines, smart boxes and production lines, robotic mechanical arms, and unmanned vehicles using AIoT, as well as 5G and leveraging on the internal and external knowledge for innovation.

4.4. Sustainable Management in Responsible Production

The case study company’s missions declare a commitment to sustainability and dedication to green environment protection. Green design is adopted in machine innovation and development. A fully Automatic Rubber and EVA-recycling pulverizing system has been implemented in Nike, Adidas, and Vans factories since 2015, which grinds rubber scraps into rubber powders for reuse. This brings factories profits by saving approximately 10% of production costs, and also fulfills the brands’ commitment to reduce global wastes [26].

A major example of a green machinery system in the case study companies is the fully automatic rubber outsole and EVA recycling plant pulverizing system [35,36,37] (Figure 3), which primarily grinds rubber outsole and flash scraps into 60-mesh rubber powders as a filler in rubber calendaring during the rubber-manufacturing process. The mechanical operation of this system features automatic working and conveying processes in a closed space or pipe. Through this process, the powder does not permeate the factory and serious, harmful air pollution can be avoided. The goal of 100% recycle and reuse can be achieved.

The process of knowledge management to develop this recycling system follows the research framework (Figure 1). PEST and SWOT analyses showed that environmental protection and green manufacturing were expected by the public and have become a requirement of major brands such as Nike and Adidas. The COVID-19 threat also inspired development of automatic and smart machines. A strength of the case study companies in the capabilities of R&D assists in the development of this system to meet customer needs. From a perspective of business model innovation, cooperation with key partners and customers helped develop and revise the system to overcome the drawbacks and make the machinery system more flexible to align with various compositions of rubber materials.

5. Conclusions

The case study company in this study, Tung Sheng Company Limited, was founded 57 years ago, and is one of leading companies in Taiwan specializing in rubber and vulcanized footwear-manufacturing machines [23]. Another case study company, Strong Basic Enterprise Limited, was established later in 1992 as a subsidiary for Tung Sheng Company, which primarily helps coordinate with other relevant companies to provide a complete service plan for customers, to design production equipment and set up whole plants in local communities worldwide with an after-sales service and follow-up maintenance [23,25]. These two companies cooperate with each other: Strong Basic Enterprise directly faces the clients to understand what they want, whereas Tung Sheng Company tries to manufacture machines to meet clients’ needs and focuses on solving technical problems that occur in the machines. It becomes a cycle: First, Strong Basic Enterprise conducts client need analysis and transfers the results to Tung Sheng Company, or tries to out-source; second, Tung Sheng Company applies its intelligent manufacturing technology to customize the machines and equipment with improvements, upgrading and increasing resilience; third, Strong Basic Enterprise tries to make sales.

This study used the analytical tools of PEST, SWOT, business model canvas, and knowledge management to assess the case study companies’ business models, and smart and sustainable management during the COVID-19 pandemic in Taiwan. The results show that the case study companies own capabilities in R&D as a foundation for applying new smart ICT, pursue sustainable management, and have strong key partnerships to diversify business investment. These resilient practices combined smart and sustainable management and helped mitigate the negative impacts of the COVID-19 pandemic. For example, a new machine was developed to make masks. In green design, an automatic refrigerating-type cooling machine was designed to avoid water pollution [24]. In green manufacturing, an automatic recycling pulverizing system [35,36,37] was developed to follow the circular economy [12].

Although COVID-19 impacts dramatically decreased revenue, it seems that it is an appropriate time for the case study companies to examine their business and management processes and to make adjustments in strategies for the future. This study provides useful and practical information for the case study companies and other similar firms. Further research can focus on competitive analyses in the industry of shoe-making machinery. More research is required to apply a big data analysis, artificial intelligence, or any new technology to increase automation or smart manufacturing by digital transmission, detection, and adjustment in the shoe-making process, because to standardize the accessories or semi-products in the manufacturing process of making vulcanized shoes remains a challenge due to the changeable characteristics of rubber materials. Future research may adopt an action or practice research design to set or re-examine SDG (sustainable development goals) strategy for case study enterprises in five steps [11,14].