SWOT Analysis / TOWS Matrix for Sumitomo Mitsui (Japan)
Based on various researches at Oak Spring University , Sumitomo Mitsui is operating in a macro-environment that has been destablized by – geopolitical disruptions, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Mitsui can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Mitsui, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Mitsui 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 Sumitomo Mitsui can be done for the following purposes –
1. Strategic planning of Sumitomo Mitsui
2. Improving business portfolio management of Sumitomo Mitsui
3. Assessing feasibility of the new initiative in Japan
4. Making a Misc. Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sumitomo Mitsui
Strengths of Sumitomo Mitsui | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sumitomo Mitsui are -
Strong track record of project management in the Misc. Financial Services industry
– Sumitomo Mitsui is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Sumitomo Mitsui 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.
Organizational Resilience of Sumitomo Mitsui
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sumitomo Mitsui does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Sumitomo Mitsui has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Mitsui staying ahead in the Misc. Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Sumitomo Mitsui is present in almost all the verticals within the Misc. Financial Services industry. This has provided Sumitomo Mitsui 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.
Sustainable margins compare to other players in Misc. Financial Services industry
– Sumitomo Mitsui has clearly differentiated products in the market place. This has enabled Sumitomo Mitsui to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Sumitomo Mitsui to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Sumitomo Mitsui comprises – understanding the underlying the factors in the Misc. Financial Services 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.
Highly skilled collaborators
– Sumitomo Mitsui has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Financial Services industry. Secondly the value chain collaborators of Sumitomo Mitsui have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Sumitomo Mitsui 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.
Low bargaining power of suppliers
– Suppliers of Sumitomo Mitsui in the Financial sector have low bargaining power. Sumitomo Mitsui has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sumitomo Mitsui to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Misc. Financial Services industry
- digital transformation varies from industry to industry. For Sumitomo Mitsui digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sumitomo Mitsui 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.
Successful track record of launching new products
– Sumitomo Mitsui has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sumitomo Mitsui 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.
Weaknesses of Sumitomo Mitsui | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sumitomo Mitsui are -
Lack of clear differentiation of Sumitomo Mitsui products
– To increase the profitability and margins on the products, Sumitomo Mitsui needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Sumitomo Mitsui 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.
Slow decision making process
– As mentioned earlier in the report, Sumitomo Mitsui has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Financial Services industry over the last five years. Sumitomo Mitsui 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.
High operating costs
– Compare to the competitors, Sumitomo Mitsui has high operating costs in the Misc. Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sumitomo Mitsui lucrative customers.
High bargaining power of channel partners in Misc. Financial Services industry
– because of the regulatory requirements in Japan, Sumitomo Mitsui 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 Misc. Financial Services industry.
Skills based hiring in Misc. Financial Services industry
– The stress on hiring functional specialists at Sumitomo Mitsui 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 Sumitomo Mitsui is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Sumitomo Mitsui needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sumitomo Mitsui to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Japan, Sumitomo Mitsui needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Sumitomo Mitsui needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Financial Services industry have deep experience in developing customer relationships. Marketing department at Sumitomo Mitsui can leverage the sales team experience to cultivate customer relationships as Sumitomo Mitsui is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Sumitomo Mitsui 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 Misc. Financial Services industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at Sumitomo Mitsui, in the dynamic environment of Misc. Financial Services industry it has struggled to respond to the nimble upstart competition. Sumitomo Mitsui has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Sumitomo Mitsui Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sumitomo Mitsui are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sumitomo Mitsui 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 Sumitomo Mitsui to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sumitomo Mitsui can use these opportunities to build new business models that can help the communities that Sumitomo Mitsui operates in. Secondly it can use opportunities from government spending in Misc. Financial Services sector.
Developing new processes and practices
– Sumitomo Mitsui can develop new processes and procedures in Misc. Financial Services 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.
Manufacturing automation
– Sumitomo Mitsui can use the latest technology developments to improve its manufacturing and designing process in Misc. Financial Services sector. 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.
Using analytics as competitive advantage
– Sumitomo Mitsui has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Financial Services sector. This continuous investment in analytics has enabled Sumitomo Mitsui to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Mitsui to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Sumitomo Mitsui 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sumitomo Mitsui in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Financial Services industry, and it will provide faster access to the consumers.
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 Sumitomo Mitsui 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.
Building a culture of innovation
– managers at Sumitomo Mitsui 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 Misc. Financial Services industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sumitomo Mitsui 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. Sumitomo Mitsui 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, Sumitomo Mitsui is facing challenges because of the dominance of functional experts in the organization. Sumitomo Mitsui can utilize new technology in the field of Misc. Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Sumitomo Mitsui can improve the customer journey of consumers in the Misc. Financial Services 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.
Learning at scale
– Online learning technologies has now opened space for Sumitomo Mitsui 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 Sumitomo Mitsui External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sumitomo Mitsui are -
Regulatory challenges
– Sumitomo Mitsui 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 Misc. Financial Services industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sumitomo Mitsui in Misc. Financial Services industry. The Misc. Financial Services 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.
Stagnating economy with rate increase
– Sumitomo Mitsui 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 Misc. Financial Services industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Sumitomo Mitsui with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Financial Services sector.
Easy access to finance
– Easy access to finance in Misc. Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sumitomo Mitsui can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Sumitomo Mitsui.
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. Sumitomo Mitsui needs to understand the core reasons impacting the Misc. Financial Services industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sumitomo Mitsui 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 Sumitomo Mitsui prominent markets.
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 Sumitomo Mitsui business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Sumitomo Mitsui 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. Sumitomo Mitsui can take advantage of this fund but it will also bring new competitors in the Misc. Financial Services industry.
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. Sumitomo Mitsui 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sumitomo Mitsui may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Financial Services sector.
Weighted SWOT Analysis of Sumitomo Mitsui Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui needs to make to build a sustainable competitive advantage.
