Tombow Pencil Co. Ltd., one of Japan's two premier pencil manufacturers, has been using a subcontractor network in order to respond to changing market conditions. The system currently faces a new challenge as Tombow moves to address a volatile business market for promotional pencils: an expanding market demanding novel products, short delivery lead time, and large quantities. To overcome growing stockouts and inventory problems, Yohei Ogawa, the company's new president and grandson of the founder, must evaluate the performance of Tombow's subcontractor-based production system and formulate a plan of action. Introduces students to the subcontractor-based production system, a system prevalent in certain parts of the world outside the United States, and allows them to analyze its performance for simple products with which they are all familiar. The analysis poses profound questions about ways to manage it more effectively and its future potential as an alternative to vertically integrated operations.
Swot Analysis of "Tombow Pencil Co. Ltd." written by Kazuhiro Mishina includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tombow Pencil facing as an external strategic factors. Some of the topics covered in Tombow Pencil Co. Ltd. case study are - Strategic Management Strategies, Marketing, Mergers & acquisitions and Technology & Operations.
Some of the macro environment factors that can be used to understand the Tombow Pencil Co. Ltd. casestudy better are - – there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, central banks are concerned over increasing inflation, geopolitical disruptions, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Tombow Pencil Co. Ltd.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tombow Pencil Co. Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tombow Pencil, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tombow Pencil 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 Tombow Pencil Co. Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in Tombow Pencil Co. Ltd. case study
2. Improving business portfolio management of Tombow Pencil
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 Tombow Pencil
Strengths Tombow Pencil Co. Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tombow Pencil in Tombow Pencil Co. Ltd. Harvard Business Review case study are -
Training and development
– Tombow Pencil has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tombow Pencil Co. Ltd. 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.
Effective Research and Development (R&D)
– Tombow Pencil 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 Tombow Pencil Co. Ltd. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Tombow Pencil is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Tombow Pencil in the sector have low bargaining power. Tombow Pencil Co. Ltd. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tombow Pencil to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Tombow Pencil
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tombow Pencil does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Tombow Pencil 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.
Superior customer experience
– The customer experience strategy of Tombow Pencil in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Technology & Operations field
– Tombow Pencil 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 Tombow Pencil 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
– Tombow Pencil Co. Ltd. firm has clearly differentiated products in the market place. This has enabled Tombow Pencil to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Tombow Pencil to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Tombow Pencil Co. Ltd. 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.
Cross disciplinary teams
– Horizontal connected teams at the Tombow Pencil 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.
Ability to recruit top talent
– Tombow Pencil is one of the leading recruiters in the industry. Managers in the Tombow Pencil Co. Ltd. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Tombow Pencil Co. Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tombow Pencil Co. Ltd. are -
High bargaining power of channel partners
– Because of the regulatory requirements, Kazuhiro Mishina suggests that, Tombow Pencil is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Aligning sales with marketing
– It come across in the case study Tombow Pencil Co. Ltd. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Tombow Pencil Co. Ltd. can leverage the sales team experience to cultivate customer relationships as Tombow Pencil is planning to shift buying processes online.
High cash cycle compare to competitors
Tombow Pencil 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.
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 Tombow Pencil supply chain. Even after few cautionary changes mentioned in the HBR case study - Tombow Pencil Co. Ltd., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tombow Pencil vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Tombow Pencil Co. Ltd., 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.
Skills based hiring
– The stress on hiring functional specialists at Tombow Pencil 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.
Increasing silos among functional specialists
– The organizational structure of Tombow Pencil is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Tombow Pencil needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tombow Pencil to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Tombow Pencil Co. Ltd. HBR case study mentions - Tombow Pencil 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Tombow Pencil needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tombow Pencil is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tombow Pencil Co. Ltd. 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, Tombow Pencil 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.
Opportunities Tombow Pencil Co. Ltd. | 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 Tombow Pencil Co. Ltd. are -
Using analytics as competitive advantage
– Tombow Pencil has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tombow Pencil Co. Ltd. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tombow Pencil to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Tombow Pencil to increase its market reach. Tombow Pencil will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tombow Pencil 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 Tombow Pencil to hire the very best people irrespective of their geographical location.
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 Tombow Pencil in the consumer business. Now Tombow Pencil can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tombow Pencil can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Tombow Pencil has opened avenues for new revenue streams for the organization in the industry. This can help Tombow Pencil to build a more holistic ecosystem as suggested in the Tombow Pencil Co. Ltd. case study. Tombow Pencil can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tombow Pencil 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.
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. Tombow Pencil can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tombow Pencil 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.
Building a culture of innovation
– managers at Tombow Pencil 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.
Leveraging digital technologies
– Tombow Pencil 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tombow Pencil is facing challenges because of the dominance of functional experts in the organization. Tombow Pencil Co. Ltd. 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.
Loyalty marketing
– Tombow Pencil 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.
Threats Tombow Pencil Co. Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tombow Pencil Co. Ltd. are -
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. Tombow Pencil can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Tombow Pencil
– 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 Tombow Pencil.
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 Tombow Pencil in the Technology & Operations sector and impact the bottomline of the organization.
Environmental challenges
– Tombow Pencil 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. Tombow Pencil can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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. Tombow Pencil needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tombow Pencil 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.
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 Tombow Pencil business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Tombow Pencil is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Tombow Pencil demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Tombow Pencil 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.
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 Tombow Pencil.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tombow Pencil with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Weighted SWOT Analysis of Tombow Pencil Co. Ltd. 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 Tombow Pencil Co. Ltd. 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 Tombow Pencil Co. Ltd. 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 Tombow Pencil Co. Ltd. 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 Tombow Pencil Co. Ltd. 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 Tombow Pencil needs to make to build a sustainable competitive advantage.