Nitto Denko Co (6988) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nitto Denko Co (Japan)
Based on various researches at Oak Spring University , Nitto Denko Co is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nitto Denko Co can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nitto Denko Co, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nitto Denko Co 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 Nitto Denko Co can be done for the following purposes –
1. Strategic planning of Nitto Denko Co
2. Improving business portfolio management of Nitto Denko Co
3. Assessing feasibility of the new initiative in Japan
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nitto Denko Co
Strengths of Nitto Denko Co | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nitto Denko Co are -
Strong track record of project management in the Semiconductors industry
– Nitto Denko Co 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 brand equity
– Nitto Denko Co has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nitto Denko Co to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Nitto Denko Co
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nitto Denko Co does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Semiconductors industry
– Nitto Denko Co has clearly differentiated products in the market place. This has enabled Nitto Denko Co to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped Nitto Denko Co to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Nitto Denko Co 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.
Training and development
– Nitto Denko Co has one of the best training and development program in Technology 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
– Nitto Denko Co is present in almost all the verticals within the Semiconductors industry. This has provided Nitto Denko Co 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.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For Nitto Denko Co digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nitto Denko Co 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.
Learning organization
- Nitto Denko Co 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 Nitto Denko Co is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nitto Denko Co emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Nitto Denko Co has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nitto Denko Co staying ahead in the Semiconductors industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Semiconductors
– Nitto Denko Co is one of the leading players in the Semiconductors industry in Japan. Over the years it has not only transformed the business landscape in the Semiconductors industry in Japan but also across the existing markets. The ability to lead change has enabled Nitto Denko Co in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Nitto Denko Co comprises – understanding the underlying the factors in the Semiconductors 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.
Weaknesses of Nitto Denko Co | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nitto Denko Co are -
High operating costs
– Compare to the competitors, Nitto Denko Co has high operating costs in the Semiconductors industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nitto Denko Co lucrative customers.
Need for greater diversity
– Nitto Denko Co 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.
High cash cycle compare to competitors
Nitto Denko Co has a high cash cycle compare to other players in the Semiconductors industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at Nitto Denko Co 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.
Lack of clear differentiation of Nitto Denko Co products
– To increase the profitability and margins on the products, Nitto Denko Co needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Nitto Denko Co 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.
Capital Spending Reduction
– Even during the low interest decade, Nitto Denko Co 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 Semiconductors industry using digital technology.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in Japan, Nitto Denko Co 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 Semiconductors industry.
Low market penetration in new markets
– Outside its home market of Japan, Nitto Denko Co needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Nitto Denko Co supply chain. Even after few cautionary changes, Nitto Denko Co is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nitto Denko Co vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Nitto Denko Co strategy
– From the outside it seems that the employees of Nitto Denko Co 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.
Nitto Denko Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nitto Denko Co are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Semiconductors industry, but it has also influenced the consumer preferences. Nitto Denko Co can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nitto Denko Co in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Semiconductors industry, and it will provide faster access to the consumers.
Manufacturing automation
– Nitto Denko Co can use the latest technology developments to improve its manufacturing and designing process in Semiconductors 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nitto Denko Co 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nitto Denko Co is facing challenges because of the dominance of functional experts in the organization. Nitto Denko Co can utilize new technology in the field of Semiconductors 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 Semiconductors industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nitto Denko Co in the Semiconductors industry. Now Nitto Denko Co 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 Nitto Denko Co to increase its market reach. Nitto Denko Co 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nitto Denko Co 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 Nitto Denko Co to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Nitto Denko Co 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.
Developing new processes and practices
– Nitto Denko Co can develop new processes and procedures in Semiconductors 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.
Loyalty marketing
– Nitto Denko Co 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.
Leveraging digital technologies
– Nitto Denko Co 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nitto Denko Co 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 Nitto Denko Co to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Nitto Denko Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nitto Denko Co are -
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 Nitto Denko Co in the Semiconductors sector and impact the bottomline of the organization.
Increasing wage structure of Nitto Denko Co
– 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 Nitto Denko Co.
Environmental challenges
– Nitto Denko Co 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. Nitto Denko Co can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
Regulatory challenges
– Nitto Denko Co 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 Semiconductors industry regulations.
Easy access to finance
– Easy access to finance in Semiconductors industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nitto Denko Co 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 Nitto Denko Co.
High dependence on third party suppliers
– Nitto Denko Co 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.
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.
Consumer confidence and its impact on Nitto Denko Co 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 Semiconductors industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nitto Denko Co may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Semiconductors sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents Nitto Denko Co with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Shortening product life cycle
– it is one of the major threat that Nitto Denko Co is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Nitto Denko Co needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Nitto Denko Co Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nitto Denko Co 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 Nitto Denko Co 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 Nitto Denko Co 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 Nitto Denko Co 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 Nitto Denko Co needs to make to build a sustainable competitive advantage.