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 – wage bills are increasing, increasing energy prices, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing commodity prices, geopolitical disruptions, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, 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 -
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.
Strong track record of project management in the Auto & Truck Parts industry
– Denso Corp. is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Innovation driven organization
– Denso Corp. is one of the most innovative firm in Auto & Truck Parts sector.
Successful track record of launching new products
– Denso Corp. has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Denso Corp. 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.
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.
Learning organization
- Denso Corp. 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 Denso Corp. is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Denso Corp. emphasize – knowledge, initiative, and innovation.
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.
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.
Ability to recruit top talent
– Denso Corp. is one of the leading players in the Auto & Truck Parts industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Weaknesses of Denso Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Denso Corp. are -
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.
Ability to respond to the competition
– As the decision making is very deliberative at Denso Corp., in the dynamic environment of Auto & Truck Parts industry it has struggled to respond to the nimble upstart competition. Denso Corp. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Lack of clear differentiation of Denso Corp. products
– To increase the profitability and margins on the products, Denso Corp. needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Denso Corp. has high operating costs in the Auto & Truck Parts industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Denso Corp. lucrative customers.
High cash cycle compare to competitors
Denso Corp. has a high cash cycle compare to other players in the Auto & Truck Parts industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Denso Corp. needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Parts industry have deep experience in developing customer relationships. Marketing department at Denso Corp. can leverage the sales team experience to cultivate customer relationships as Denso Corp. is planning to shift buying processes online.
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 Denso Corp. supply chain. Even after few cautionary changes, Denso Corp. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Denso Corp. vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
Building a culture of innovation
– managers at Denso Corp. 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 Auto & Truck Parts industry.
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. Denso Corp. can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Parts industry, but it has also influenced the consumer preferences. Denso Corp. can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Denso Corp. can improve the customer journey of consumers in the Auto & Truck Parts industry by using analytics and artificial intelligence. It 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Parts industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Denso Corp. 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. Denso Corp. 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.
Threats Denso Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Denso Corp. are -
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.
Technology acceleration in Forth Industrial Revolution
– Denso Corp. has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, Denso Corp. needs to keep up with the evolution of technology in the Auto & Truck Parts 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.
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.
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.
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..
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. Denso Corp. 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.
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 Denso Corp. business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Increasing wage structure of Denso Corp.
– 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 Denso Corp..
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.
Environmental challenges
– Denso Corp. 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. Denso Corp. can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
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 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.