SWOT Analysis / TOWS Matrix for Denso Corp. (Japan)
Based on various researches at Oak Spring University , Denso Corp. is operating in a macro-environment that has been destablized by – increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing household debt because of falling income levels, there is backlash against globalization, geopolitical disruptions,
increasing energy prices, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Denso Corp. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Denso Corp., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Denso Corp. 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 Denso Corp. can be done for the following purposes –
1. Strategic planning of Denso Corp.
2. Improving business portfolio management of Denso Corp.
3. Assessing feasibility of the new initiative in Japan
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Denso Corp.
Strengths of Denso Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Denso Corp. are -
High brand equity
– Denso Corp. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Denso Corp. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Denso Corp. has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Parts industry. Secondly the value chain collaborators of Denso Corp. have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Denso Corp. 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.
Training and development
– Denso Corp. has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Denso Corp. is one of the most innovative firm in Auto & Truck Parts sector.
Effective Research and Development (R&D)
– Denso Corp. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Denso Corp. staying ahead in the Auto & Truck Parts industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Auto & Truck Parts industry
– Denso Corp. has clearly differentiated products in the market place. This has enabled Denso Corp. to fetch slight price premium compare to the competitors in the Auto & Truck Parts industry. The sustainable margins have also helped Denso Corp. to invest into research and development (R&D) and innovation.
Digital Transformation in Auto & Truck Parts industry
- digital transformation varies from industry to industry. For Denso Corp. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Denso Corp. 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.
Low bargaining power of suppliers
– Suppliers of Denso Corp. in the Consumer Cyclical sector have low bargaining power. Denso Corp. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Denso Corp. to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Denso Corp. 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 Auto & Truck Parts industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Auto & Truck Parts
– Denso Corp. is one of the leading players in the Auto & Truck Parts industry in Japan. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in Japan but also across the existing markets. The ability to lead change has enabled Denso Corp. in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Denso Corp. in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Denso Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Denso Corp. are -
Low market penetration in new markets
– Outside its home market of Japan, Denso Corp. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in Japan, Denso Corp. 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 Auto & Truck Parts industry.
Slow to strategic competitive environment developments
– As Denso Corp. is one of the leading players in the Auto & Truck Parts industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Parts industry in last five years.
High dependence on Denso Corp. ‘s star products
– The top 2 products and services of Denso Corp. still accounts for major business revenue. This dependence on star products in Auto & Truck Parts industry has resulted into insufficient focus on developing new products, even though Denso Corp. has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Denso Corp. 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 Auto & Truck Parts industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Parts industry, Denso Corp. 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.
Skills based hiring in Auto & Truck Parts industry
– The stress on hiring functional specialists at Denso Corp. 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.
Compensation and incentives
– The revenue per employee of Denso Corp. is just above the Auto & Truck Parts industry average. It 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.
Employees’ less understanding of Denso Corp. strategy
– From the outside it seems that the employees of Denso Corp. 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.
Increasing silos among functional specialists
– The organizational structure of Denso Corp. is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but Denso Corp. needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Denso Corp. to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Denso Corp. 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.
Denso Corp. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Denso Corp. are -
Learning at scale
– Online learning technologies has now opened space for Denso Corp. 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.
Creating value in data economy
– The success of analytics program of Denso Corp. has opened avenues for new revenue streams for the organization in Auto & Truck Parts industry. This can help Denso Corp. to build a more holistic ecosystem for Denso Corp. products in the Auto & Truck Parts industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Denso Corp. can use these opportunities to build new business models that can help the communities that Denso Corp. operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Parts industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Denso Corp. in the Auto & Truck Parts industry. Now Denso Corp. can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Denso Corp. is facing challenges because of the dominance of functional experts in the organization. Denso Corp. can utilize new technology in the field of Auto & Truck Parts industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Denso Corp. 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 Denso Corp. to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Denso Corp. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Denso Corp. 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 Denso Corp. to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Denso Corp. 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Denso Corp. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Denso Corp. can develop new processes and procedures in Auto & Truck Parts 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.
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 Denso Corp. 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.
Using analytics as competitive advantage
– Denso Corp. has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled Denso Corp. to build a competitive advantage using analytics. The analytics driven competitive advantage can help Denso Corp. to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Denso Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Denso Corp. are -
Shortening product life cycle
– it is one of the major threat that Denso Corp. is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Denso Corp. in Auto & Truck Parts industry. The Auto & Truck Parts 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.
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. Denso Corp. needs to understand the core reasons impacting the Auto & Truck Parts industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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 Denso Corp..
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.
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 Denso Corp. in the Auto & Truck Parts sector and impact the bottomline of the organization.
Consumer confidence and its impact on Denso Corp. 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 Auto & Truck Parts industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents Denso Corp. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Parts sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Denso Corp. may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Parts sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Denso Corp. 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 Denso Corp. prominent markets.
Stagnating economy with rate increase
– Denso Corp. 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 Auto & Truck Parts industry.
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Denso Corp. can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Denso Corp. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Denso Corp. 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 Denso Corp. 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 Denso Corp. 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 Denso Corp. 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 Denso Corp. needs to make to build a sustainable competitive advantage.