The president of Daikin Industries Residential Air Conditioning Shiga Factory confronted the prospect of an unseasonably cold summer at a time when the Shiga Factory had large quantities of its products in inventory in anticipation of strong summer sales. The president was concerned not only about pending losses in the current year, but also about the factory's long-term survival. Unprofitability was unacceptable and Daikin was caught in a stagnant market in which it was increasingly difficult to build share by product differentiation. The Shiga Factory had been forced to use large inventories to cope with uncertain demand and a long and unwieldy supply chain. The president must decide whether to reduce the number of models, build a lower cost factory outside Japan, or exit the business. He must also determine whether there are any other options.
Swot Analysis of "Daikin Industries" written by Chris J. Piper, Tetsu Imigi includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Daikin Shiga facing as an external strategic factors. Some of the topics covered in Daikin Industries case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Daikin Industries casestudy better are - – there is increasing trade war between United States & China, there is backlash against globalization, increasing energy prices, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs,
challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Daikin Industries
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Daikin Industries case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Daikin Shiga, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Daikin Shiga 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 Daikin Industries can be done for the following purposes –
1. Strategic planning using facts provided in Daikin Industries case study
2. Improving business portfolio management of Daikin Shiga
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Daikin Shiga
Strengths Daikin Industries | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Daikin Shiga in Daikin Industries Harvard Business Review case study are -
Highly skilled collaborators
– Daikin Shiga has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Daikin Industries HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Daikin Shiga has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Daikin Shiga to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Daikin Shiga digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Daikin Shiga has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Diverse revenue streams
– Daikin Shiga is present in almost all the verticals within the industry. This has provided firm in Daikin Industries case study 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.
Training and development
– Daikin Shiga has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Daikin Industries Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Technology & Operations field
– Daikin Shiga is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Daikin Shiga in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Technology & Operations industry
– Daikin Industries firm has clearly differentiated products in the market place. This has enabled Daikin Shiga to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Daikin Shiga to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Daikin Shiga 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.
Effective Research and Development (R&D)
– Daikin Shiga has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Daikin Industries - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Daikin Shiga has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Daikin Shiga 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.
Low bargaining power of suppliers
– Suppliers of Daikin Shiga in the sector have low bargaining power. Daikin Industries has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Daikin Shiga to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Daikin Shiga is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Daikin Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Daikin Industries are -
Slow decision making process
– As mentioned earlier in the report, Daikin Shiga has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Daikin Shiga 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.
Need for greater diversity
– Daikin Shiga 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.
Slow to strategic competitive environment developments
– As Daikin Industries HBR case study mentions - Daikin Shiga takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though Daikin Shiga has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Daikin Industries should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Daikin Industries, is just above the industry average. Daikin Shiga 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.
Increasing silos among functional specialists
– The organizational structure of Daikin Shiga is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Daikin Shiga needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Daikin Shiga to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Daikin Shiga has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Daikin Shiga products
– To increase the profitability and margins on the products, Daikin Shiga needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Daikin Industries, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Daikin Shiga 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Daikin Industries, it seems that the employees of Daikin Shiga don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities Daikin Industries | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Daikin Industries are -
Developing new processes and practices
– Daikin Shiga can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Daikin Shiga can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Daikin Shiga 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 Technology & Operations segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Daikin Shiga 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, as suggested in case study, Daikin Industries, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Daikin Shiga 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.
Loyalty marketing
– Daikin Shiga has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Daikin Shiga can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Daikin Industries suggest that firm 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.
Leveraging digital technologies
– Daikin Shiga 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.
Manufacturing automation
– Daikin Shiga can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Daikin Shiga 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. Daikin Shiga 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Daikin Shiga in the consumer business. Now Daikin Shiga can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Daikin Shiga 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 Daikin Shiga to hire the very best people irrespective of their geographical location.
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. Daikin Shiga can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Daikin Industries External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Daikin Industries are -
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.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Daikin Shiga can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Daikin Shiga with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Daikin Shiga 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 field.
Increasing wage structure of Daikin Shiga
– 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 Daikin Shiga.
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 Daikin Shiga in the Technology & Operations sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Daikin Shiga in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Daikin Shiga has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Daikin Shiga needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Daikin Shiga 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.
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 Daikin Shiga business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Daikin Shiga 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 prominent markets illustrated in HBR case study Daikin Industries .
Shortening product life cycle
– it is one of the major threat that Daikin Shiga is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Daikin Industries, Daikin Shiga may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Weighted SWOT Analysis of Daikin Industries Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Daikin Industries 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 the case study Daikin Industries 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 the Harvard case study Daikin Industries 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 Daikin Industries is 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 Daikin Shiga needs to make to build a sustainable competitive advantage.
