Sumitomo Electric Industries (5802) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sumitomo Electric Industries (Japan)
Based on various researches at Oak Spring University , Sumitomo Electric Industries is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, geopolitical disruptions, there is increasing trade war between United States & China, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Sumitomo Electric Industries
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Electric Industries can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Electric Industries, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Electric Industries 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 Electric Industries can be done for the following purposes –
1. Strategic planning of Sumitomo Electric Industries
2. Improving business portfolio management of Sumitomo Electric Industries
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 Sumitomo Electric Industries
Strengths of Sumitomo Electric Industries | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sumitomo Electric Industries are -
Digital Transformation in Auto & Truck Parts industry
- digital transformation varies from industry to industry. For Sumitomo Electric Industries digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sumitomo Electric Industries 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.
Ability to lead change in Auto & Truck Parts
– Sumitomo Electric Industries 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 Sumitomo Electric Industries in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Sumitomo Electric Industries in the Consumer Cyclical sector have low bargaining power. Sumitomo Electric Industries has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sumitomo Electric Industries to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Sumitomo Electric Industries 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
– Sumitomo Electric Industries 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 Sumitomo Electric Industries have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Sumitomo Electric Industries 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.
Analytics focus
– Sumitomo Electric Industries 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.
High brand equity
– Sumitomo Electric Industries has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sumitomo Electric Industries to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Sumitomo Electric Industries has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Electric Industries 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.
Successful track record of launching new products
– Sumitomo Electric Industries has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sumitomo Electric Industries 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.
Learning organization
- Sumitomo Electric Industries 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 Sumitomo Electric Industries is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sumitomo Electric Industries emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Sumitomo Electric Industries is present in almost all the verticals within the Auto & Truck Parts industry. This has provided Sumitomo Electric Industries 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.
Weaknesses of Sumitomo Electric Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sumitomo Electric Industries are -
Employees’ less understanding of Sumitomo Electric Industries strategy
– From the outside it seems that the employees of Sumitomo Electric Industries 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.
High dependence on Sumitomo Electric Industries ‘s star products
– The top 2 products and services of Sumitomo Electric Industries 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 Sumitomo Electric Industries has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Sumitomo Electric Industries, it seems that company is thinking out the frontier risks that can impact Auto & Truck Parts industry. 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.
Slow to strategic competitive environment developments
– As Sumitomo Electric Industries 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sumitomo Electric Industries is slow explore the new channels of communication. These new channels of communication can help Sumitomo Electric Industries to provide better information regarding Auto & Truck Parts products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Sumitomo Electric Industries is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but Sumitomo Electric Industries needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sumitomo Electric Industries to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Sumitomo Electric Industries 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 Sumitomo Electric Industries can leverage the sales team experience to cultivate customer relationships as Sumitomo Electric Industries is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Parts industry, Sumitomo Electric Industries 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 Sumitomo Electric Industries 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 Sumitomo Electric Industries, in the dynamic environment of Auto & Truck Parts industry it has struggled to respond to the nimble upstart competition. Sumitomo Electric Industries has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Sumitomo Electric Industries has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Parts industry over the last five years. Sumitomo Electric Industries 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.
Sumitomo Electric Industries Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sumitomo Electric Industries are -
Leveraging digital technologies
– Sumitomo Electric Industries 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.
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 Electric Industries can use these opportunities to build new business models that can help the communities that Sumitomo Electric Industries operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
Learning at scale
– Online learning technologies has now opened space for Sumitomo Electric Industries 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.
Better consumer reach
– The expansion of the 5G network will help Sumitomo Electric Industries to increase its market reach. Sumitomo Electric Industries 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.
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. Sumitomo Electric Industries can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Sumitomo Electric Industries 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.
Developing new processes and practices
– Sumitomo Electric Industries 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sumitomo Electric Industries 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 Sumitomo Electric 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sumitomo Electric Industries is facing challenges because of the dominance of functional experts in the organization. Sumitomo Electric Industries 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.
Loyalty marketing
– Sumitomo Electric Industries 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.
Buying journey improvements
– Sumitomo Electric Industries 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.
Creating value in data economy
– The success of analytics program of Sumitomo Electric Industries has opened avenues for new revenue streams for the organization in Auto & Truck Parts industry. This can help Sumitomo Electric Industries to build a more holistic ecosystem for Sumitomo Electric Industries products in the Auto & Truck Parts industry by providing – data insight services, data privacy related products, data based consulting services, 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 Sumitomo Electric Industries in the Auto & Truck Parts industry. Now Sumitomo Electric Industries can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Sumitomo Electric Industries External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sumitomo Electric Industries are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sumitomo Electric Industries 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 wage structure of Sumitomo Electric Industries
– 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 Sumitomo Electric Industries.
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.
Regulatory challenges
– Sumitomo Electric Industries 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 Auto & Truck Parts industry regulations.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sumitomo Electric Industries 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 Electric Industries prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sumitomo Electric Industries 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.
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 Sumitomo Electric Industries in the Auto & Truck Parts sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Sumitomo Electric Industries 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.
Consumer confidence and its impact on Sumitomo Electric Industries 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.
Environmental challenges
– Sumitomo Electric Industries 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 Electric Industries can take advantage of this fund but it will also bring new competitors in the Auto & Truck Parts industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents Sumitomo Electric Industries 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.
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 Electric Industries needs to understand the core reasons impacting the Auto & Truck Parts industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Sumitomo Electric Industries Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Electric 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 Sumitomo Electric 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 Sumitomo Electric 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 Sumitomo Electric Industries 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 Electric Industries needs to make to build a sustainable competitive advantage.