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 - – technology disruption, challanges to central banks by blockchain based private currencies, there is backlash against globalization, cloud computing is disrupting traditional business models, increasing commodity prices, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, talent flight as more people leaving formal jobs, 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 -
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.
Ability to recruit top talent
– Daikin Shiga is one of the leading recruiters in the industry. Managers in the Daikin Industries are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Organizational Resilience of Daikin Shiga
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Daikin Shiga does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Learning organization
- Daikin Shiga 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 Daikin Shiga is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Daikin Industries Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Daikin Shiga 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 industry. The technology infrastructure suggested by Chris J. Piper, Tetsu Imigi can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Daikin Industries Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that Daikin Shiga has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
Weaknesses Daikin Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Daikin Industries are -
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Daikin Shiga is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Daikin Industries can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Daikin Shiga has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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.
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 Daikin Shiga supply chain. Even after few cautionary changes mentioned in the HBR case study - Daikin Industries, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Daikin Shiga vulnerable to further global disruptions in South East Asia.
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.
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.
High cash cycle compare to competitors
Daikin Shiga has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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 -
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Daikin Shiga is facing challenges because of the dominance of functional experts in the organization. Daikin Industries case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Daikin Shiga can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Daikin Shiga can use these opportunities to build new business models that can help the communities that Daikin Shiga operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Daikin Shiga in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Daikin Shiga 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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Daikin Shiga 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.
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.
Regulatory challenges
– Daikin Shiga 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 Technology & Operations industry regulations.
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 .
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.
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 Daikin Shiga.
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.
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. Daikin Shiga needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Daikin Shiga will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
Environmental challenges
– Daikin Shiga 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. Daikin Shiga can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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.
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.