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 inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, wage bills are increasing, technology disruption, increasing energy prices,
increasing household debt because of falling income levels, 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 -
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.
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.
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.
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.
Strong track record of project management in the Auto & Truck Parts industry
– Sumitomo Electric Industries is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Innovation driven organization
– Sumitomo Electric Industries is one of the most innovative firm in Auto & Truck Parts sector.
Training and development
– Sumitomo Electric Industries 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.
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.
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.
Superior customer experience
– The customer experience strategy of Sumitomo Electric Industries in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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 -
Compensation and incentives
– The revenue per employee of Sumitomo Electric Industries 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.
Low market penetration in new markets
– Outside its home market of Japan, Sumitomo Electric Industries needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Interest costs
– Compare to the competition, Sumitomo Electric Industries 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.
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 Sumitomo Electric Industries supply chain. Even after few cautionary changes, Sumitomo Electric Industries is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sumitomo Electric Industries vulnerable to further global disruptions in South East Asia.
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.
High bargaining power of channel partners in Auto & Truck Parts industry
– because of the regulatory requirements in Japan, Sumitomo Electric Industries 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.
High operating costs
– Compare to the competitors, Sumitomo Electric Industries 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 Sumitomo Electric Industries lucrative customers.
High cash cycle compare to competitors
Sumitomo Electric Industries 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.
Need for greater diversity
– Sumitomo Electric Industries has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Sumitomo Electric Industries has some of the most successful models in the Auto & Truck Parts industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sumitomo Electric Industries should strive to include more intangible value offerings along with its core products and services.
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 -
Using analytics as competitive advantage
– Sumitomo Electric Industries 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 Sumitomo Electric Industries to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Electric Industries to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Sumitomo Electric Industries can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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.
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. Sumitomo Electric Industries can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Electric Industries 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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sumitomo Electric Industries can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sumitomo Electric Industries 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.
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.
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.
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 -
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.
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.
Shortening product life cycle
– it is one of the major threat that Sumitomo Electric Industries is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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. Sumitomo Electric Industries can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Sumitomo Electric Industries high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 Electric Industries.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Sumitomo Electric Industries has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, Sumitomo Electric Industries 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.
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.